The Right and the Wrong Way To Address High Gas Prices

Americans are looking for ways to cut fuel costs, with fuel prices at record levels. Two states provide a good model for how to do this…while the Biden administration and California consider going the wrong way.

Maryland and Georgia will temporarily suspend their gas tax to allow people to pay lower prices when they fill up their tank.

Georgia Governor. Brian Kemp, a Republican has signed a bill that will halt Georgia’s $0.29/gallon gasoline tax and $0.33/gallon diesel fuel tax through May. Maryland Governor. Larry Hogan, also a Republican, has approved a suspension of his state’s gas and diesel fuel taxes—$0.36 cents per gallon and nearly $0.37 cents per gallon respectively—for the next 30 days.

The two other states aren’t the only ones considering offering a discount to gas tax consumers. The report states that “Lawmakers from Illinois, Massachusetts and Maine are considering whether or not to suspend gasoline taxes in their respective states.” Wall Street Journal reports. “Connecticut Gov. Ned Lamont (a Democrat) and the legislative leaders reached an agreement to halt state collection on gasoline taxes until June.

According to the report, “And at the federal stage, some members are asking the Biden administration for fuel tax suspensions.” Journal.

This is arguably the good side of government action to reduce fuel prices—saving consumers money by temporarily foregoing taking some of their money.

The gas tax is primarily targeted at road and transportation spending. However, decreasing the revenue doesn’t mean spending less. While drivers might save money at the pump they end up having higher taxes to cover the gap created by tax holidays.

It’s also very gimmicky to temporarily suspend gas taxes as a response to political pressure. Ironically, Democrats are now attempting to cut gas prices. They have argued for decades that higher gas prices are better for the environment. Saving consumers money and temporarily not taking money from them is certainly a better option than handing out cash to stop inflation.

We now come to the other side. Some officials want to help consumers save money and subsidize gas purchases. Although briefly thought about sending gas cards, the Biden administration decided against it.

Many people feel that the suspension of fuel taxes does not help enough. But a break of some $0.30 per gallon—or more if the feds suspend gas taxes, too—adds up. Instead of treating everyone as having the same fuel requirements, it adjusts the price breaks to reflect the actual amount of gasoline purchased. Although it might not make a significant difference or drive down gas prices across the board this has the advantage that gas prices are less likely to rise.

But handing out government money to thwart high gas prices is like—pardon the pun—pouring gasoline on a fire. Inflation will rise if there is more government spending. Increased gas consumption means higher inflation. It would also be difficult to target the program towards people who truly need it and not everyone who is able to afford higher gas prices or don’t have the means to purchase much. It would also be difficult to stop fraud.

Good news: House Democrats have “vehemently opposed” the idea of a gas card, according to Axios:

The House Democratic Counsel On Wednesday, the White House published a list of reasons why gas card would not be an idea.

  • This would make it expensive and not be well targeted.
  • The effect could increase inflation. It won’t reduce costs.
  • The slow delivery of cards could delay tax returns by causing the IRS to be overwhelmed in middle of filing season.

California is however still looking at a $400 gas discount. This would function as a “free gasoline” card since it would be available to everyone who has income tax.


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