By Jeff Lenard, Vice President of NACS Media & Strategic Communications
As gas prices hit $4 for the first time in nearly four years, federal lawmakers and a growing list of states are considering suspending the gas tax. Commonly referred to as a “gas tax holiday,” the suspension would also include diesel fuel.
Gas prices now stand at $4.02 as of Tuesday, according to AAA, the highest they have been since September 2022, following the Russian invasion of Ukraine.
Members of Congress from both parties have floated the concept of a federal gas tax holiday, which could be as long as six months, according to some proposals. The federal tax on gasoline is 18.4 cents and is 24.4 cents for diesel.
During his most recent cabinet meeting, President Trump said that he has “thought about” suspending the tax, but instead encouraged states to look at the issue, according to the Associated Press. “People have talked about” federal gas tax relief, said Trump. “It’s something we have in our pocket if we think it’s necessary.”
Georgia suspended its state gas tax on March 20. On Monday, March 30, state Attorney General of Georgia Chris Carr issued a warning to fuel retailers that they should pass along the full tax cut or face repercussions. Over the past week, gas prices in Georgia have dropped while they have increased across the rest of the country. Still, Carr warned retailers that he is monitoring prices, and that failure to fully pass along the tax savings “could constitute an unfair or deceptive act, which the Attorney General has the authority to investigate and prosecute,” reported WSB-TV.
A growing list of states are now considering some form of gas tax relief, including Virginia, Pennsylvania, Connecticut, Washington, Oregon, Alabama, South Carolina, California, Maryland and Utah.
Meanwhile, in what is certainly not an April Fool’s Day joke, Indiana is set to raise its gas tax by roughly 2 cents on April 1.
The goal of gas tax relief is to reduce costs for consumers, an intended result that convenience stores naturally support. Meanwhile, the day that gas tax relief laws take effect, news crews eagerly visit convenience stores to compare prices—and we know because NACS gets phone calls from reporters. “Did prices drop X cents?” they ask. If not, something’s wrong, right? Unfortunately, it’s not that simple, something that NACS explained in a blog post.
Many consumers—and lawmakers for that matter—are not aware of the fact that it takes time for any untaxed fuel to make its way through the supply chain to retailers—and that those retailers often have fuel in their storage tanks that were taxed for some time after a tax holiday starts. Over time, of course, changes in the cost of crude oil, refining and transportation of fuel make up some of the largest parts of the price of gasoline and diesel at the pump.
Other groups have significant concerns about suspending the federal gas tax. Suspending taxes could increase the federal deficit and jeopardize highway and public transit programs that depend on funding that comes from federal gas and diesel fuel taxes, the Associated Press noted.
If it were to enact some sort of federal tax relief, the United States wouldn’t be the first country to do so. In Australia, starting April 1, the federal tax on gas and diesel fuel will be cut in half for 90 days. In addition, two Australian states will offer free mass transit for a limited time to help reduce demand and ease supply concerns in the country, reported The New York Times.