Gas Tax Holiday? Some States Proposing Suspension of Gas Tax for Remainder of 2022.
Everyone is feeling the burden of rising costs that have grown exponentially since 2020. The average cost of groceries has risen 7.9%. The average energy bill is 25.6% higher than in February of 2021. Fuel costs seem to jump 50 cents whenever I step on my dog’s chew toy, which admittedly has been more frequent as of late. Some states have recently been pushing for some help at the fuel pump by suspending state gas taxes for some part or the remainder of 2022. California, which has the highest gas tax in the nation at $0.6696 per gallon has proposed a $400 rebate. Most states currently in discussion regarding the gas tax are proposing a temporary decrease in the gas tax or not allowing automatic tax increases to occur. At the federal level, there is a bill to amend the Internal Revenue Code of 1986 to provide a gasoline tax holiday which has remained at $0.184 per gallon since 1993.
Is a Gas Tax Holiday a Good Idea?
The Committee for a Responsible Federal Budget estimates that it would cost almost $20 billion if the gas tax were to be suspended at the federal level between March through December 2022. This would be almost half of the revenue the Highway Trust Fund is expected to generate in the next year. With the costs of roadway maintenance rising year over year it doesn’t seem to make sense to cut the funding in half.
With the return of more normalization as COVID-19 has declined in the country the demand for gas has risen to what it was pre-pandemic. The production has not returned to those 2019 numbers because of supply chain issues, the Russian invasion of Ukraine, and simply the time it takes to ramp up production.
Therefore, a gas tax holiday is likely to only help in the extremely short term, before the demand at lower prices blows further past the amount able to be produced, resulting in even higher prices at the pump.
Please reach out to the professionals at the Center for Financial, Legal, and Tax Planning, Inc., at (618) 997-3436 for more information.