State gas tax holidays resulted in savings that were “mostly passed on to consumers,” research finds. Experts say the results of a federal plan may be limited.
The federal gas tax is paid by the refiner when the fuel leaves the refinery gate. The state gas taxes are paid by distributors or refiners. How much of that tax gets passed on to the consumer varies based on how fixed the supply is over the months the holiday is in effect.
For the federal tax holiday, 50% to 60% of the tax decrease may be passed on to consumers initially, though that may decrease over time, Prisinzano estimated."The benefit only works if everybody maintains the same amount of driving, and the retailers don't raise their prices any more," Prisinzano said.
The committee estimates Biden's plan would reduce sticker inflation by 0.1% when it goes into effect. But then as soon as the gas tax holiday ends, it would increase inflation by more than 0.1%, bringing gas prices back to where they were or higher.An Arco gas station displays the price per gallon at over $6 in Monterey Park, California on June 22, 2022.
One-off state gas tax holidays may result in more savings for consumers, since they do not affect the national market, and therefore may not further disrupt the supply and demand imbalance, said Jared Walczak, vice president of state projects at the Tax Foundation."Suspending the gas tax is largely a political gimmick," Walczak said."It is trying to patch over a larger problem.
"Policy makers trying to artificially bring down prices for a couple of months without doing anything about the underlying restrictions on supply are only going to make the problem worse in the long run," he said.
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