David A. Lib
Due to record high U.S. gas prices, a growing number of state governors and lawmakers are calling for a suspension of gas taxes to ease motorists facing the prospect of even higher pump prices as the country cuts back on Russian oil imports.
Proposals for a “gas tax holiday” to counter inflation have been moving slowly in Congress and state capitals before Russia invaded Ukraine, but they gained momentum this week amid rising prices averaging $ 4.25 on Wednesday. gallon, reports AAA.
Republican legislative leaders in Michigan and Pennsylvania announced on Wednesday proposals to suspend or reduce state taxes on gas. It came after the governor of Georgia and the Democratic governor of California on Tuesday called for the lifting of state taxes on gas when President Joe Biden ordered a ban on Russian oil imports.
Meanwhile, governors from the Colorado Democratic Party, Michigan, Minnesota, New Mexico, Pennsylvania and Wisconsin sent a joint letter to congressional leaders urging them to support a law suspending the federal government’s gas tax of 18.4 cents per gallon by 2022.
Critics of the proposals say there is no guarantee that the savings will be passed on to consumers, and are worried that the suspension of gas taxes could damage the financing of road projects. Despite this, staggering pump prices are forcing lawmakers to act.
“Over the past few days, we’ve seen gas prices soar to historic levels,” Pennsylvania Senate President Jake Corman, a Republican running for governor, said in a note seeking co-authors. “We must do everything we can to address this issue at the state government level and offer our support to hardworking families.”
Pennsylvania’s gas tax of 57.6 cents a gallon is the highest in the country, ahead of California. Corman said he is introducing a law to cut about one-third by the end of the year. The lost gas tax revenue will be offset by directing $ 500 million in federal assistance to COVID-19 state police and issuing bonds worth $ 650 million to secure funding for infrastructure projects.
Legislation under consideration in both the House of Representatives and the U.S. Senate will also compensate for the loss of revenue from gas tax suspensions by transferring an equal amount of common fund dollars to accounts funded by state highways and public transportation programs. This legislation is opposed by groups advocating for the financing of roads and bridges. They fear that the suspension of taxes will be a bad precedent and will be politically difficult to recover if politicians support the tax increase, if it starts again.
The possibility of lost infrastructure funding has been one of the biggest hurdles for those seeking to suspend or reduce gas taxes, but some government officials say they can afford the financial blow. Many states ended fiscal year 2021 with record cash balances due to inflows of federal aid due to the pandemic and economic revival, which brought in more revenue and sales tax than expected.
The Michigan fuel tax suspension of 27.2 cents a gallon from April to September will cost about $ 725 million. The bill was passed Wednesday in the House of Representatives, which is controlled by the Republican Party, and is now going to the State Senate, also controlled by Republicans. In the office of the governor of Michigan, Democrat Gretchen Whitmer said it could hinder road repairs.
“Michigan has billions of dollars in surplus revenue,” House Speaker Jason Wentworth said in a statement Wednesday. “The decision here is not difficult. Republicans are going to take action today and put a real plan on the governor’s table to actually reduce the cost of the pump. “
Although average gas prices are at record levels, they are not yet the highest paid by inflation-adjusted Americans. The previous record high of $ 4.10 per gallon in July 2008 would have been approximately $ 5.24 in today’s dollars.
Proposals to suspend gas taxes are based on the assumption that the savings will be passed on to consumers.
“The money saved at the pump turns into dollars in consumers’ pockets for groceries, childcare, rent and more,” the six Democratic governors wrote in a letter Tuesday to Democratic and Republican leaders in Congress.
But proponents of transportation say that due to other factors affecting gas prices, the full amount of tax cuts may not be reflected at the pump.
On average, only about one-third of the cost of previous gas tax cuts or tax increases was passed on to consumers, according to a report by the American Road and Transportation Builders Association for 2020, which analyzed 113 changes in gas taxes passed over several years. This is because retail gas prices are affected by complex factors, including the price of crude oil and the pressure of supply and demand.
“The real problem with this approach, both at the federal and state levels, is that there is no way to guarantee that people will see these savings when they go to the gas station to refuel their cars, SUVs and trucks,” said Jim Tyman. , executive director of the American Association of Public Highway and Transportation Officials.
Last year, Georgia Gov. Brian Kemp suspended taxes on motor fuel for several days to offset rising prices after a computer break-in led to the shutdown of a key pipeline that supplies fuel to much of Georgia.
On Tuesday, Kemp said he again wanted to suspend the gas tax of 29.1 cents a gallon due to rising prices, although details still need to be worked out in legislation passed by the General Assembly.
California Gov. Gavin Newsom also renewed a call for help from rising gas prices during his speech in the state on Tuesday, after a previous proposal did not gain much circulation in the Democrat-led legislature. The average price per gallon of gas in California reached $ 5.57 on Wednesday – the highest in the country, according to AAA.
After Newsham’s speech, California Senate President Tony Atkins and Assembly Speaker Anthony Randon issued a joint statement saying they plan to seek tax breaks from the common fund instead of “a small reduction in gas tax that may not pass on to consumers.” ”
This week, Virginia lawmakers also negotiated a suspension of the recent gas tax increase for one year. The proposal was a key campaign promise by Governor Glen Yangkin, a Republican elected last November. The Republican-controlled House of Representatives included a temporary 5-cent gasoline tax cut in its budget proposal, but the Democrat-controlled Senate did not.
Prior to the Russian invasion of Ukraine, Florida Republican Gov. Ron DeSantis proposed a five-month pause over the state gas tax this summer as part of a broader package of tax breaks. Democratic Party Governor J. B. Pritzker of Illinois also proposed to stop the automatic 2.2-cent increase in the state’s fuel tax as part of a broader tax cut.
Lawmakers in other states – including Maryland, Minnesota, New York and Ohio – have also proposed suspending or abolishing gas taxes. A day after Russia invaded Ukraine, Missouri spokesman Andrew Schwadron, a Republican, filed a six-month law suspending motor fuel taxes, citing an emergency to protect consumers from rising prices.
“The quickest way we could provide this relief would be to temporarily suspend this gas tax,” he said.
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Associated Press authors from all over the United States have contributed to this report.
