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Gas prices are going through the roof. Right now, the average price for a gallon of regular unleaded gas in the U.S. is well over $4 per gallon ($4.27 per gallon on March 18). And that’s a national average – prices are much higher in some parts of the country (averaging well over $5 per gallon in California). Plus, there’s no sign of a retreat any time soon, so who knows how high gas prices will go. The Biden administration is looking for a way to help reduce the pain at the pump – but the options are limited. Encouraging greater oil production and tapping the nation’s Strategic Petroleum Reserve are certainly on the table, but what about a gas tax holiday?

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Temporarily suspending the 18.4¢ per gallon federal gas tax would certainly put a dent in higher gas prices. Even though it wouldn’t come close to wiping out the entire price increase we’ve experienced lately, it’s one tool at the federal government’s disposal. In fact, a bill has been introduced in Congress that would reduce the federal gas tax to zero for the rest of the year. And while the Biden administration is concentrating more on increasing the global oil supply, it hasn’t ruled out the possibility of a fuel tax holiday.

State gas tax holidays are also possible. In fact, they could help reduce gas prices even more because state gas taxes are higher than the federal tax in all but one state (Alaska). A number of governors and state lawmakers from around the country are publicly supporting fuel tax holidays in their state. And leaders in at least one state have already agreed to a temporary suspension of their fuel tax and are working on legislation to finalize the deal. Expect more state governors and legislators to follow their lead.

Will the Federal Gas Tax be Suspended?

At this point, a federal gas tax holiday seems unlikely. First, it wouldn’t save people all that much money. For example, a person who drives 12,000 miles a year in a car that averages 25 miles per gallon would only save about $70 if the federal gas tax was suspended for the rest of 2022. But the overall loss of tax revenue would be high – estimated to be about $20 billion. That’s money that wouldn’t be available for road repairs and other needed infrastructure projects. The cost-benefit analysis doesn’t favor a gas tax holiday in many people’s minds.

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There’s also some concern that the oil companies wouldn’t pass along all the savings to consumers if the federal gas tax was suspended. The current bill in Congress addresses this concern by stating that the “policy of Congress” is that “consumers immediately receive the benefit of the reduction in taxes” and that “transportation motor fuels producers and other dealers take such actions as necessary to reduce transportation motor fuels prices to reflect such reduction.” However, the policy has no teeth. There’s only a weak enforcement clause that permits the U.S. Treasury Department to “use all applicable authorities to ensure that the benefit of the reduction in taxes…is received by consumers.” There are no specific fines or other penalties for failing to abide by the law.

Finally, because of the concerns noted above, there isn’t enough support on Capitol Hill to suspend the federal gas tax. Some Congressional Democrats are certainly interested in the idea. Sen. Chris Murphy (D-Conn.) hopes there’s “renewed interest on measures like a gas tax holiday, given the fact that energy prices are likely to head up for the foreseeable future in part because of the restrictions on Russian oil.” But there doesn’t appear to be much support, if any, among Republicans on the Hill. There were no Republican co-sponsors of the federal gas tax holiday bill currently before Congress (and, frankly, only a few Democrats signed on). When asked if he supports a gas tax holiday, Sen. John Kennedy (R-La.) called it a “gimmick” that’s “not going to make any difference.” He also said that Senate Republicans “haven’t talked a lot about it.” In a letter to President Biden, Sen. Mark Lankford (R-Okla.) said a gasoline tax holiday “would do precious little in the short run and nothing in the long run.” Without some bipartisan support, a gas tax holiday cannot get through the Senate.

All of this could change if gas prices get high enough or drag on for an extended period of time. But at present, the odds of seeing a federal fuel tax holiday are slim.

State Gas Tax Holidays are More Likely

You’re much more likely to see your state gas tax suspended. One reason being that many states can afford a tax cut right now because they have budget surpluses, due to recent economic growth and/or federal pandemic-relief funds.

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Maryland was the first state in the country to suspend its gas tax this year – but only by a nose. Gov. Larry Hogan (R) signed a bill on March 18 that authorizes a 30-day gas tax holiday, which will save Marylanders about 36¢ per gallon at the pump for gasoline (approximately 37¢ per gallon for diesel). Later the same day, Georgia Gov. Brian Kemp (R) put his name on a bill that will suspend his state’s motor fuel excise tax until the end of May (the prepaid local sales tax is not suspended). The Georgia tax is about 29¢ per gallon for gasoline (just under 33¢ per gallon for diesel).

Other governors and lawmakers from around the country have also suggested a gas tax holiday or other fuel tax relief measures for their state. States where gas tax relief of one form or another is currently being pushed by the governor or considered in the legislature include:

• Alaska – Gov. Mike Dunleavy (R) asked state legislators to suspend the state’s gas tax until the end of June 2023.
• California – Gov. Gavin Newsom (D) has suggested delaying an upcoming gas tax increase or establishing a gas tax rebate, while a bill introduced in the legislature would suspend the gas tax for six months. (Note: The California gas tax holiday bill is stalled. Republican lawmakers recently failed to force a vote on the bill to move it forward.)
• Colorado – Gov. Jared Polis (D) proposed delaying a gas tax increase set to take effect in July.
• Connecticut – Gov. Ned Lamont (D) recommended suspending the 25¢ per gallon excise tax on gasoline through June 30 (the separate 10.75¢ per gallon petroleum products gross earnings tax would still apply).
• Florida – A budget bill passed by the state legislature includes a one-month fuel tax holiday in October. Gov. Ron DeSantis (R) earlier proposed a five-month suspension.
• Idaho – A bill before the state legislature would reduce the state’s gas tax for two years.
• Illinois – Gov. J.B. Pritzker (D) wants to delay the annual gas tax increase, while some state legislators would rather cap the state’s gas tax at 18¢ per gallon.
• Maine – A bill has been introduced in the legislature to suspend the state’s gas tax until the end of the year.
• Michigan – The state legislature passed a bill that would impose a six-month suspension of the gas tax (although it wouldn’t start until next year). Gov. Gretchen Whitmer (D) is expected to veto the bill.
• Minnesota – A group of lawmakers have proposed a gas tax holiday from Memorial Day to Labor Day.
• Mississippi – A six-month gas tax holiday has been added to a larger tax bill that’s working it’s way through the state legislature.
• Missouri – Proposed legislation that would allow a six-month fuel tax holiday has been introduced in the state legislature.
• New Jersey – A bill introduced in the state legislature would provide an immediate $250 or $500 tax rebate to help cover the higher cost of gas and other items.
• New York – Multiple bills are being considered by the state legislature that would suspend the gas tax for different time periods (e.g., for a year, through 2022, or until September). Gov. Kathy Hochul (D) is lukewarm about the idea. Another proposal before the state legislature would cap the state gas tax at 25¢ per gallon.
• Ohio – A bill before the state legislature would reduce the gas tax for five years, but Gov. Mike DeWine (R) is skeptical.
• Pennsylvania – Bills to temporarily cut the gas tax or suspend it through the end of the year have been introduced in the state legislature.
• Rhode Island – A bill before the state legislature would suspend the state’s gas tax for the rest of the year.
• Virginia – Gov. Glenn Youngkin (R) is pushing for a three-month gas tax holiday – May to July – and then phase the state’s gas tax back in slowly in August and September.

It’s hard to say if any other states will ultimately enact a gas tax holiday or other gas tax relief. From the list above, Florida is very close to finalizing a deal, but it’s too difficult to predict what other states will do. The situation is also very fluid across the country, so don’t be surprised if the fuel tax holiday movement gains traction in other states as well. This is especially true if gas prices continue to remain high, which is expected.

Sean Lengell, Kiplinger Associate Editor and Congressional Reporter, contributed to this article.

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