Do gas tax holidays automatically result in significantly lower prices and big savings for motorists at the pump? The short answer is “no,” according to new research from the American Road & Transportation Builders Association (ARTBA).
The association examined 177 changes in state gasoline tax rates in 34 states between 2013 and 2021 and found that on average, just 18 percent of an increase or decrease was passed on to motorists in the retail price of gasoline in the two weeks after a change took effect.
The results come as 24 states have either enacted or are considering a temporary suspension of their gas taxes or other transportation-related user fees. Legislation has also been introduced in the U.S. Senate and House of Representatives to suspend the federal gas tax for the rest of the year.
“In the middle of the Russian invasion of Ukraine and record inflation along with high gas prices, efforts by federal and state lawmakers to bring relief to consumers are well-intentioned,” ARTBA chief economist Dr. Alison Premo Black said. “But they are ineffectual in the short-term and they compromise revenues for transportation improvements in the long-term.”
The study, conducted by Dr. Black and ARTBA Transportation Investment Advocacy Center director Carolyn Kramer, used data from the Oil Petroleum Information Service (OPIS) and the U.S. Energy Information Administration (EIA). ARTBA’s conclusions mirror those of other previous academic studies: the price of crude oil is the primary driver of changes in the retail price of gasoline, not gasoline taxes.
The report looks specifically at 2021 gas tax rate decreases in New Jersey and Georgia.
New Jersey decreased its gas tax rate 8.3 cents-per-gallon on October 1. The per-gallon price of gas stayed constant for three consecutive days, then began to increase with rising crude oil prices. By the end of the month, New Jersey motorists were paying seven percent more for gasoline. In fact, they paid more for gasoline every day for the rest of 2021.
In Georgia, Gov. Brian Kemp on May 10 suspended the state gas tax of 28.7 cents for a month when a computer hack shut down a key pipeline. The price of gas spiked from $2.87 on May 10 to $2.97 on May 14, then settled at $2.91 per gallon on June 2 when the gas tax was reinstated. Despite the reinstatement of the 28.7-cent gas tax, the average price of gasoline remained at $2.91 for the rest of the month.
“The New Jersey and Georgia cases highlight the negligible effect changing gas tax rates can have on retail gas prices,” Black said. “That’s why gas tax holidays are not the best policy for rising prices–they take money away from transportation system investment and don’t necessarily stem the pain consumers feel at the pump.”
Source: ARTBA
