In March, U.S. gasoline prices hit an all-time high at $4.33 per gallon, surpassing the previous record set in 2008. Clearly, this is not news to laundromat owners who offer pickup-and-delivery services for their residential wash-dry-fold and/or commercial accounts businesses.
Inflation, increased demand from motorists traveling to work and vacation as COVID-19 subsides, and concerns over Russia’s invasion of Ukraine and its impact on energy markets have caused gas prices to surge, according to a recent report by MultiState Associates, a state and local government relations firm based in Alexandria, Va.
The Biden Administration has responded to these rising prices by releasing 1 million barrels of oil from the country’s strategic reserve and suspending the summer ban on ethanol-blended gasoline.
However, as of this writing, President Biden has not yet indicated support for a suspension of the 24.4-cents-per-gallon federal gas tax, advocated by some members of Congress.
Yet some states have begun offering their own gas-tax “holidays,” where gas purchased during a certain period of time will be exempted from state gas taxes, or taxed at a lower rate.
Thus far, four states – Connecticut, Georgia, Maryland and New York – have enacted measures to suspend or lower the state gas tax this summer, and lawmakers in 22 states have introduced legislation to do the same.
In Connecticut, it took just three days for legislators to fast-track a bill to suspend the 25-cents-per-gallon state gas tax from April 1 to June 30, 2022.
In addition, New York Governor Kathy Hochul included a provision in the state’s enacted budget bill that suspends 16 cents of the 33-cents-per-gallon gas tax from June 1 until the end of 2022.
In March, Georgia Governor Brian Kemp signed a bill into law that suspends the state gas tax of 29.1-cents-per-gallon from March 18 until May 31, 2022. Signed that same week, Maryland’s law suspended the state gas tax for just one month. The 36-cents-per-gallon tax was reinstated on April 18, after Maryland lawmakers ended their session without extending the tax break.
The Michigan Legislature also passed legislation to suspend the gas tax, but Governor Gretchen Whitmer vetoed the measure. She called the proposal to suspend the 27-cents-per-gallon tax for six months a “misguided proposal” that “does nothing for Michiganders facing pain at the pump right now,” according to Max Rieper, senior policy analyst for MultiState Associates.
Whitmer has instead proposed exempting gasoline from the 6 percent sales tax, a measure that would save drivers 24 cents on a $4 gallon of gas.
California lawmakers also have advocated a different approach – direct payments to taxpayers. California has the highest gas prices in the country, and Governor Gavin Newsom has called for a $400 gas tax refund to be given away in debit cards. Rieper stated some Democrats want to exclude high-income vehicle owners, an idea Newsom is open to, while a Republican bill would simply suspend the gas tax for six months.
Of course, suspending the gas tax is not without costs. “Gas-tax revenues are used to support transportation funding, and a suspension in taxes could blow a hole through infrastructure budgets,” according to Rieper.
The one-month Maryland gas-tax holiday will cost the state an estimated $100 million, with money from the Transportation Trust Fund used to make up the shortfall. The Michigan bill would have cost the state around $750 million, while saving drivers an estimated average of $75 per person this summer.
Georgia’s gas tax holiday will cost an estimated $400 million in revenues to the state, but the state will use a budget surplus from last year to plug the budget gap. Connecticut is doing the same to cover the estimated $90 million in foregone revenues. Meanwhile, New York will cover the estimated $585 million in lost revenue with money from the general fund.
“The gas-tax holidays also have caused some confusion for retailers who have already paid the state tax for fuel sitting in their tanks but are being accused of price-gouging for failing to reduce prices,” Rieper wrote. “And it has angered climate activists who see the rising prices as an opportunity to wean drivers off fossil fuels and onto more renewable sources of energy.
“Notably, gas prices have fallen in the last few weeks, reducing the need for gas-tax suspensions. On the other hand, the oil market continues to be highly volatile, and it’s not clear when another surge in prices may hit as travel picks up and demand increases this summer.”
