Proposals for a 'gas tax holiday' to counter inflation had been moving slowly in Congress and state capitols before Russia invaded Ukraine, but they gained momentum this week amid surging prices.
at record highs across the U.S., an increasing number of governors and state lawmakers are calling for the suspension of gas taxes to provide relief to motorists who are facing the prospect of even higher pump prices as the country cuts off Russian oil imports.
Critics of the proposals say there is no guarantee the savings would get passed on to consumers and worry that suspending gas taxes could hurt funding for road projects. Even so, the eye-popping prices at the pump are prompting lawmakers to act. The potential for lost infrastructure funding has been one of the biggest obstacles to those seeking to suspend or reduce gas taxes, but some state officials say they can afford the financial hit. Many states ended their 2021 fiscal years with record cash balances due to an influx of federal pandemic aid and a resurgent economy that yielded greater income and sales tax revenue than expected.
Proposals to suspend gas taxes are based on an assumption that the savings would be passed on to consumers. On average, only about one-third of the value of previous gas tax cuts or tax increases were passed on to consumers, according to a 2020 report from the American Road & Transportation Builders Association that analyzed 113 state gas tax changes enacted over several years. That's because retail gas prices are influenced by complex factors, including the price of crude oil and supply-and-demand pressures.
After Newsom's speech, California Senate President Pro Tem Toni Atkins and Assembly Speaker Anthony Rendon issued a joint statement saying they plan to pursue tax relief from the general fund instead of"a small cut to the gas tax that might not get passed on to consumers."
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