Don’t get your hopes up for a federal gas tax holiday

Even before Russia invaded Ukraine, gasoline prices in the United States were going up due to that Econ 101 basic supply and demand.

During the COVID-19 pandemic, more U.S. workers starting doing their jobs remotely. Working from home meant no commuting, so fewer vehicle fill-ups.

Oil producers, notably the OPEC (Organization of the Petroleum Exporting Countries) cartel, responded by cutting production sharply in 2020.

Since then, things have returned to, for lack of better words, more normal. Demand for oil and products like gasoline has surged since pandemic lows. But production has not kept up. More people wanting a scarce item means that item’s price is higher.

As the prices of fuel and other inflation-affected customer staples starting rising, politicians jointed TV talking heads and economists in noticing, and pontificating, on what must be done.

Gas tax holiday proposed: With legislators, that means more laws.

Just before February’s Consumer Price Index, or CPI, showed a 7.5 percent year-over-year increase, several members of Congress announced plans for legislation that would establish a federal gas tax holiday through the end of 2022.

The Gas Prices Relief Act, sponsored in the House by Rep. Tom O’Halleran (D-Arizona) and in the Senate by Sens. Mark Kelly (D-Arizona) and Maggie Hassan (D-New Hampshire), would suspend the 18.4 cents per gallon federal gas tax for the rest of the year.

Adding up more than federal taxes: The federal levy is just one component of the price we pay at our local gas station pumps.

There’s also a 24.4 cents per gallon tax on diesel fuel. Then states add their own taxes (and fees) on top of Uncle Sam’s, meaning that the average driver pays around 39 cents per gallon for gas on top of the federal tax, according to the American Petroleum Institute.

That average obviously varies by state and region. Here in Texas, our pump prices tend to be much lower than, for example, those faced by California drivers.

Gasoline prices in my suburban Austin neighborhood on Feb. 22, 2022. (Photo by Kay Bell)

In announcing his support of the federal gas tax holiday bill, California Democratic Rep. Josh Harder cited AAA data showing Golden State drivers pay an average of $4.68 cents per gallon, the highest price in the nation and $1.20 more than the national average.

Paying for federal roads: Those federal fuel excise tax dollars go into the Highway Trust Fund, created to help maintain federal highways.

But its collections have struggled to meet the United States roadway needs, in large part because the gas tax hasn’t been raised since 1993.

Some good news is that the Biden Administration’s infrastructure bill enacted last November included a one-time transfer of general revenues into the Highway Trust Fund, extending its near-term solvency by five years through 2027.

But those five years will go by quickly. That’s one reason that many, on Capitol Hill and in the private sector, say the federal gas tax suspension of even a few months shouldn’t, and is unlikely to happen, even with gas prices now going up more in response to the  Russian military action.

Gas tax holiday outlook: That’s also the focus of this weekend’s Saturday Shout Outs.

The following articles offer economic, political, and energy company outlooks, as well as some advice on how to deal with the increasing cost of topping off your auto’s tank.

• The Federal Gas Tax Holiday is Not a New Idea, Just a Bad One from the Institute on Taxation and Economic Policy (ITEP)
• Why the gas tax totally upends politics as usual from MSNBC
• Gas Tax Holiday Could Backfire On Democrats from Forbes
• Gas prices have spiked amid the Russia-Ukraine conflict. Here are tips for saving at the pump from CNBC

I agree with those who say this bill won’t go anywhere. Plus, I’m skeptical that even if federal gas tax collections were halted temporarily, the few cents savings would be passed on to consumers.

If you’re of the same mindset, you might want to start with the money saving tips article first.

You also might find these items of interest:

• When did your state adopt its gasoline tax?
• Tax provisions are part of finally finished infrastructure bill
• No gas tax increase in federal infrastructure bill, but Missouri’s fuel hike will stand

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