The average U.S. gas price reached $4.11 per gallon on Wednesday, according to AAA, as most states resist calls to suspend motor fuel taxes amidst sustained high prices. Tax policy experts argue such suspensions offer limited relief to drivers and risk undermining critical infrastructure funding. Only three states have enacted temporary cuts. "Band-Aids don't fix potholes," said Adam Hoffer, director of excise tax policy at the Tax Foundation.
A recent CBS News poll indicated 51% of respondents found current fuel costs a financial hardship. This sentiment underscores public pressure on state governments to act. However, state capitals largely maintain existing tax structures, prioritizing long-term fiscal stability over short-term price adjustments.
Here is the number that matters: The average state gas tax stands at 32.6 cents per gallon, according to the U.S. Energy Information Administration. These levies, alongside the federal 18.4-cent gas tax and 24.3-cent diesel tax, form the backbone of transportation funding.
Most states have chosen not to interfere with this revenue stream, even as pump prices remain elevated due to fallout from the war with Iran. Only a handful of states have moved to mitigate their motor fuel taxes since the conflict in the Middle East escalated. Georgia became the first last month.
Governor Brian Kemp, a Republican, signed a 60-day suspension on the state’s 33-cent-per-gallon gas tax and 37-cent-per-gallon diesel tax. This measure was part of a broader bill returning state income tax refunds to citizens. On April 8, Indiana’s Republican Governor Mike Braun issued an executive order.
It mandated a 30-day suspension of that state’s 7% gasoline sales tax. Utah also temporarily reduced its state fuel tax, but only by 6 cents on the gallon. This brought its state gas tax to 32 cents per gallon for the remainder of 2026.
These actions represent isolated responses, rather than a coordinated national shift. The federal government, for its part, shows no inclination to suspend its fuel taxes. Such a move would require an act of Congress.
Lawmakers and governors across the country cite substantial reasons for their reluctance, according to tax policy experts. They point to the fiscal implications and questionable effectiveness of such measures. Carl Davis, research director at the Institute on Taxation and Economic Policy, did not mince words. "The bottom line is it's an expensive gimmick," Davis stated.
He argued that if the objective is to provide tax cuts to working-class and middle-class drivers, gas tax suspensions largely miss the intended target. The benefits are often diluted before reaching consumers. Strip away the noise and the story is simpler than it looks.
Gas taxes are not like a sales tax, which is typically passed directly to the consumer. Davis explained that suspending motor fuel taxes does not guarantee all savings will reach drivers. "The evidence suggests that with these short-term gas tax changes, some of the cut will get to drivers and some of it won't," he elaborated. A portion is often retained by the oil and fuel industries along the supply chain.
A 2022 Penn Wharton study analyzing temporary fuel tax holidays provided concrete data. It found that drivers saw only a chunk of the tax cut, not the entirety. In Maryland, 72% of the tax cut was passed on to consumers.
In Georgia, the figure was 62%. Connecticut saw 71% passed through. The remaining percentages were presumed to be absorbed by fuel wholesalers or distributors.
These entities pay the gas tax to the federal government and can choose to keep some of their savings rather than lowering pump prices. Georgia Governor Brian Kemp expressed pride in his state's action. He said it would "deliver meaningful tax relief" to Georgians.
Georgia House Speaker Jon Burns estimated the suspension would save drivers "nearly $400 million over the next 60 days." These are significant figures for state officials. However, the Institute on Taxation and Economic Policy projected a different outcome. It estimated Georgia would lose about $399 million in revenue over its 60-day suspension.
Furthermore, the bottom 60% of earners in Georgia would save only $13 a month. The benefit is not evenly distributed. Maryland Democratic Governor Wes Moore appeared on "Face the Nation with Margaret Brennan" earlier this month.
He repeatedly declined to say he was open to suspending his state's 47-cent-per-gallon gas tax. Moore argued the true problem lies with the war and its inherent uncertainty. He anticipates gas prices will remain elevated even after the conflict concludes.
His stance reflects a broader concern among state leaders. Policy experts consistently describe gas and diesel taxes as a "user fee" for roadways. This means the individuals utilizing the roads are the ones who pay the taxes and, in turn, benefit from their application.
Without these taxes, drivers would ultimately bear the negative consequences. Road improvement projects could face significant delays. Potholes might go unfilled, as Davis pointed out.
Drivers could then incur unplanned repair costs for their vehicles. "Gas taxes are the single most important way that states pay for transportation infrastructure," Davis asserted. He added that when these taxes are suspended, a substantial portion of funds used to maintain bridges and roads disappears. "That's not something drivers should be excited about," he concluded. Many states already draw upon other revenue sources to fund road projects.
They cannot afford to relinquish this dedicated tax revenue. Suspending gas taxes also means revenue is not collected from out-of-state drivers. States, carefully managing their budgets, are not eager to give up revenue that would benefit passersby and commercial drivers who do not contribute to their local tax base.
This consideration further complicates the political calculus for any state considering a tax holiday. The federal level faces similar challenges. Adam Hoffer noted that the federal gas tax money flows directly into the federal Highway Trust Fund.
This fund, like its state counterparts, is gradually becoming underfunded. "I think that's the reason why we're not seeing a federal proposal at this time," Hoffer observed. Former President Joe Biden proposed a federal gas tax holiday in 2022. Congressional Democrats dismissed the idea.
During the 2008 financial crisis, then-candidate Barack Obama also dismissed similar calls. "Well, let me tell you, this isn't an idea designed to get you through the summer, it's designed to get them through an election," Obama said at the time. The political motivations are often clear. Why It Matters: The debate over fuel tax suspensions highlights a fundamental tension between immediate consumer relief and long-term public investment.
While drivers feel the pinch of higher prices, eliminating these taxes threatens the very infrastructure that enables travel and commerce. For ordinary citizens, this means a trade-off: potentially lower prices at the pump today, but at the cost of deteriorating roads, bridges, and public transit systems tomorrow. It also raises questions about equity, as the actual savings may disproportionately benefit fuel industries rather than the struggling families governments aim to assist.
Key Takeaways: - Most U.S. states resist fuel tax suspensions despite high gas prices, citing revenue concerns. - Experts argue tax holidays are an "expensive gimmick" with limited benefit for drivers, as savings are often absorbed by fuel industries. - Fuel taxes are critical "user fees" for transportation infrastructure, and suspensions risk funding for roads and bridges. - The federal government also shows no movement to suspend its fuel taxes, facing similar fiscal constraints and political precedents. Looking ahead, the U.S. Before the war with Iran began, the EIA anticipated national gas prices to average $2.95 per gallon in 2027.
Now, it projects an average of $3.46 per gallon for that year. The summer travel season is fast approaching. This will likely amplify consumer demand.
Any reinstatement of suspended taxes could hit drivers at an inconvenient moment. The market is telling you something. Listen.
The financial pressure on both consumers and state budgets will continue to mount, forcing ongoing debate on how best to balance immediate relief with critical long-term investment.
Key Takeaways
— - Most U.S. states resist fuel tax suspensions despite high gas prices, citing revenue concerns.
— - Experts argue tax holidays are an "expensive gimmick" with limited benefit for drivers, as savings are often absorbed by fuel industries.
— - Fuel taxes are critical "user fees" for transportation infrastructure, and suspensions risk funding for roads and bridges.
— - The federal government also shows no movement to suspend its fuel taxes, facing similar fiscal constraints and political precedents.
Source: CBS News
