Holiday with the gas tax? Not so fast, says Washington, DC tax think tank

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When Pennsylvania Gov. Tom Wolf welcomed President Joe Biden‘s plan to ban Russian energy imports to the US in response to President Vladimir Putin’s invasion of Ukraine, he also announced his support for a so-called federal gas tax holiday until 2022 Prices at the pump to explode.

Wolf said he signed a letter sent along with the governors of Michigan, Wisconsin, Colorado, New Mexico and Minnesota to congressional leaders in support of the federal tax holiday.

“At a time when people are directly affected by rising prices for basic necessities, a federal gas tax holiday is one tool in the toolbox to bring down costs for Americans,” the governors wrote. “We support federal legislation to counter rising gas prices by suspending the federal gas tax through the end of the year.”

But a senior policy adviser at the Tax Foundation, a Washington, DC-based think tank founded in 1937 by a group of prominent businessmen, doesn’t think the plan would help in the long run.

In fact, Ulrik Boesen, senior policy analyst at the foundation, said the tax exemption would likely hurt Americans more than it would help them.

“Basically, we don’t like this proposal,” said Boesen. “In reality, the state gas tax is only 18.4 cents per gallon.

“In addition, at the federal level, the gas tax contributes the majority of the funds for federal road financing of bridges and road construction. If you take that away for a period of time, you end up having to fill that money with more deficit spending,” he said.

More deficit spending would likely “increase the nation’s inflationary pressures,” Boesen said.

The staggering prices at the pump are also prompting some state legislators to act in Michigan and Pennsylvania, where Republican lawmakers announced proposals to suspend or cut state gas taxes.

“In the past few days, we’ve seen gas prices rise to historic levels,” Pennsylvania Senate President Jake Corman told Pro Tempore, a Republican running for governor, in a memo released after fellow supporters for the legislation seeks. “We must do everything we can to address this now at the state government level and offer our support to hard-working families.”

Pennsylvania’s gas tax of 58.7 cents a gallon is the nation’s highest, just ahead of California’s. Corman said he would introduce legislation for a reduction of about a third by the end of the year. The lost revenue would be offset by channeling $500 million in federal COVID-19 relief assistance to the state police and issuing $650 million in bonds to ensure infrastructure projects continue to be funded.

Local Unity Township Supervisor Mike O’Barto also posed questions about Wolf’s suggestions on a community blog in Latrobe.

He pointed out that Pennsylvania has one of the highest gas taxes in the country and residents should consult government leaders about those revenues.

The state gas tax, along with vehicle license fees, brings in about $4.5 billion, with about $2.7 billion for roads and bridges, $1.8 billion for state police, highway and driver and vehicle services are used, O’Barto noted.

O’Barto reached out his comments Wednesday, saying if the state enacted a temporary holiday on a portion of the state gas taxes through the end of 2022, “I would be willing to ask the governor and our lawmakers to do so if that’s the Case would be saving money…at the pump.

“But at the same time, we would probably get less tax on liquid fuels in 2023. We use liquid fuel money like most municipalities do for salt, asphalt and pavement,” he said.

“But when gas is over $5 a gallon, I don’t know how people are going to do it. I think the government should step up and take some responsibility,” O’Barto said.

Although average gas prices are at record levels, adjusted for inflation, they are not yet the highest Americans have paid. The previous record high of $4.10 a gallon in July 2008 would be about $5.24 in today’s dollars.

Proposals to suspend gas taxes are based on the assumption that the savings would be passed on to consumers.

The Associated Press contributed to this report.

Paul Peirce is a Contributor to the Tribune Review. You can contact Paul at 724-850-2860, [email protected] or via Twitter .

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