What a Gas Tax Freeze Would Actually Mean for Drivers Right Now

Gas prices have nearly doubled since the Iran conflict started in February, and for the average family, that means spending an extra $200 a month on fill-ups. To try to ease that burden, some politicians are pushing to lower state gas taxes and least freeze tax increases. It’s a move that feels logical, but unfortunately doesn’t automatically lead to lower prices.

“A common misconception about gas taxes is that they are the reason for rising gas prices,” says cost-of-living and home financial expert Cody Schuiteboer. “However, crude oil prices, refinery capacity, regional requirements and fuel blends have a much higher impact on pump prices.”

Here’s what to know about gas taxes, including their pros and cons, and how much a tax reduction might save you at the pump.

What Is the Gas Tax?

A gas tax is a fee added to the price of gasoline by federal and state governments. The federal tax has been 18.4 cents per gallon (24.4 cents per gallon for diesel) since October 1993. State gas taxes vary and are used to support transportation infrastructure projects, such as maintaining roadways.

Which States Have a Gas Tax?

All 50 states, plus the District of Columbia, impose some form of gas tax. “There are many different formulas,” says Schuiteboer. “Some taxes are strictly per-gallon, some incorporate sales tax components, and some are adjusted automatically in line with inflation or wholesale fuel prices.”

Why Are Governors Trying to Freeze It Now?

Most of it is due to the sudden rise in crude oil prices. According to AAA, as of the first week of May, gas prices had risen to an average of $4.46 per gallon, nearly double what the price was before the U.S.-Iran conflict began on February 28.

But some of the gas tax freezes and reductions also have to do with political posturing in an election year. “This year presents the political season in which gas prices remain the single most prominent consumer expense on the national radar,” says Schuiteboer.

Which Governors Are Trying?

Kentucky Governor Andy Beshear signed an emergency regulation on May 5, which froze an upcoming state gas tax increase. He also signed an executive order to temporarily reduce the gas tax by ten cents per gallon, a move that could collectively save state residents almost $27 million per month.

Some other politicians taking steps toward lowering gas taxes include:

• Georgia Governor Brian Kemp signed a 60-day order suspending the state gas tax.
• Connecticut governor Ned Lamont is discussing the idea.
• Maryland legislators, who are also in the discussion stages.
• U.S. Representative Chris Pappas of New Hampshire, who proposed legislation to suspend the federal gas tax through October 2026.
• Several California presidential candidates are also suggesting pausing the state gas tax.

Even President Donald Trump has expressed he aims to suspend the federal gas tax to CBS News.

Benefits of a Gas Tax Freeze

It depends on how much you drive and your vehicle’s fuel efficiency, but for a family with two cars, Schuiteboer estimates that a 10-cent reduction in the gas tax would save a household $150 to $200 per year.

“These are substantial figures for a personal budget,” he says. But “it is important to stress that gas-tax suspension is just a part of an overall solution, and it cannot provide complete relief from the rising gas prices.”

Disadvantages of a Gas Tax Freeze

Because gas-tax revenue pays for the construction and repair of roads, bridges and other transportation infrastructure, the loss or reduction of a gas tax means less money and delays for those projects.

FAQ

Does a gas tax freeze lower prices at the pump immediately?

Nope. Taxes are applied at the wholesale level, so it’s up to retailers and wholesalers to choose to pass along those savings to customers, says Schuiteboer. In Kentucky, to prevent this, Beshear also activated the state statute on price gouging.

Have gas tax freezes worked in the past?

Sometimes. In 2022, Connecticut suspended its gas tax from April to December. “That amounted to real consumer savings,” says Schuiteboer. But in cases where price-gouging regulations aren’t in place, consumers tend not to see any savings.

Which states have the highest gas taxes?

According to the U.S. Energy Information Administration (EIA), the states with the highest gas taxes are:

• California, 70.9 cents
• Illinois, 66.4 cents
• Washington, 59.0 cents
• Pennsylvania, 53.7 cents
• Hawaii, 52.5-55.0 cents
• Conversely, Alaska has the lowest state gas tax, at about 9 cents per gallon.

About the Experts

• Cody Schuiteboer is president and CEO of Best Interest Financial, where he leads teams that assist individuals in navigating the bigger-picture cost-of-living impacts of fuel prices, home payment plans, transportation costs and household budgets.

Sources

CBS News: “Trump says he aims to suspend gas tax “for a period of time”

The post What a Gas Tax Freeze Would Actually Mean for Drivers Right Now appeared first on Family Handyman.

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