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Inflation fuels drive to suspend state gasoline taxes

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A gas pump in Arlington, Virginia.

Gas prices have leaped since a year ago, and some states have suspended taxes on the product to compensate. Saul Loeb/AFP via Getty Images

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Crude oil prices were down Monday on news that Shanghai is locking down because of the latest COVID-19 outbreak, which might dampen global energy demand. 

With the war in Ukraine, sanctions on Russia and OPEC doing little to increase global supply, prices are still well over $100 per barrel and gasoline is averaging $4.24 per gallon nationwide. That’s down about 10 cents from the all-time high reached a few weeks ago.

Consumers are feeling it, and some state lawmakers are doing something to try to push pump prices lower.

Three states — Maryland, Georgia and Connecticut — have suspended their gas taxes temporarily. Ohio, West Virginia and California are considering the move. California Gov. Gavin Newsom has proposed a $400-per-car gas tax rebate, plus free public transit for three months. 

“No one buys it because they love it, right? In other words, you have to have transportation. It literally burns into thin air,” said Mark Hamrick, senior economic analyst at Bankrate.

It’s no wonder some state lawmakers are temporarily eliminating gas taxes to ease motorists’ irritation and pressure on their finances.

“On average, state gas taxes are about 37 cents per gallon,” said Jared Walczak, vice president of state projects at the Tax Foundation. “That’s less than 10% of the price of gasoline at the pump right now.”

The price per gallon is up $1.40, or nearly 50%, from a year ago. “That’s a lot,” he said.

“The gas tax is a relatively small portion of that. And I understand it’s the element that’s within policymakers’ control. They’re capable of suspending that. A state policymaker can’t do anything about broad inflation, let alone what’s going on in Ukraine,” he said.

But Walczak called it bad fiscal policy. “It severs the link between driving and the maintenance of the roads. Gas taxes are a good tax that fund road construction in a pretty good proxy for individuals’ use of those roads.”

Critics also point out that working people are struggling with inflation that affects all the necessities of life, not just gasoline.

“We’re seeing these sharply rising prices in food, in overall energy. And lower-income people just don’t have the cushion to deal with such shocks,” according to Chuck Marr, vice president for federal tax policy at the Center on Budget and Policy Priorities.

Marr said that far better than a few states suspending gas taxes would be for Congress to restore the expired child tax credit, which helped families pay their soaring gasoline, heating and electricity bills every month.

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