With no end in sight to the gas price hike, consumers are looking for ways to save on gas costs. As a result of the relentless rise in gas prices, some are wondering whether a federal gas tax holiday will alleviate the situation.
There are 2 main questions pertaining to this possibility that must be answered:
– How much of a reduction in gas prices will a federal gas tax holiday bring about?
– Will the Fed even reduce the federal gas tax in the first place?
Everyone is feeling the heat at the pump owing to the inexorable rise in gas prices. The cost of unleaded regular gas is more than $4.5 per gallon according to the nationwide average. In some places, gas prices could be much higher. Like in California, where gas is selling for an exorbitant $6 per gallon.
The trouble is that gas prices won’t be going down anytime soon. From all indications, it appears that gas prices will not only stay high but could also creep higher. Many are debating whether the federal government will reduce the federal gas tax. Another important consideration is how much the price will go down if the state were to suspend its federal gas tax.
Not by an awful lot it seems. Even if the federal gas tax were to be suspended in its entirety, the downward movement of price will be barely felt. The tax on a gallon of gas is hardly 18.5 cents and the effect on gas prices will be meager if all the gas taxes were to be wiped out.
Something is better than nothing right? This brings us back to the question of whether the Biden administration will even think of reducing federal gas taxes to bring much-needed relief no matter how small.
Judging on current conditions there is a slim possibility of that happening. There is currently a bill in Congress that if passed would suspend the federal gas tax for the rest of the year.
The Biden administration has not ruled out slashing the gas tax. A much more interesting prospect is a state gas tax holiday. The state of Alaska would be excluded as the state gas tax is more than the federal gas tax.
Some states have temporarily suspended the state gas tax. Governors and officials from the remaining states have been advocating a temporary state gas tax holiday. Hopefully, a few more states will bring their state gas taxes to zero for some time at least.
The federal gas suspension will only result in minuscule savings for consumers, but the cost to the Fed will be great since it will lose around $15 billion in revenue per year. The cost/benefit analysis does not favor a state gas tax holiday.
A federal gas tax holiday does not seem likely and would only help a little even if enacted. State gas tax suspensions would be much more fruitful since they are often higher than the federal gas tax. Let’s hope that all states will bring about a tax holiday for a temporary time frame.