Do gas tax holidays actually bring relief at the pump?

Comments: by Andrew Dorn - 05/14/26 8:45 PM ET Comments: Link copied by Andrew Dorn - 05/14/26 8:45 PM ET Comments: Link copied NOW PLAYING (NewsNation) — Gas prices have surged amid the war with Iran, and while President Trump has called for suspending the federal gas tax, state-level tax relief could ultimately provide bigger savings at the pump. National gas prices have climbed to more than $4.50 per gallon, roughly $1.50 higher than before the war began. Most of the increase has been driven by higher oil prices tied to disruptions in the Strait of Hormuz, but policymakers are increasingly looking at tax breaks as one of the few ways they can quickly lower costs for drivers. Taxes and fees on gas amount to an average of 51 cents per gallon in the U.S. About 18 cents of that is the federal gas tax, while the remaining 33 cents comes from state taxes and fees. Those state-level taxes and fees range from as high as 71 cents per gallon in California to as low as 9 cents in Alaska. Most states have a higher gasoline tax than the federal government does, said Patrick De Haan, head of petroleum analysis at GasBuddy. Against that backdrop, several states, including Georgia, Indiana and Kentucky, have rolled out gas tax relief measures in response to rising prices. Last week, Indiana Gov. Mike Braun (R) suspended the state s gasoline excise tax through June 7. The order also extended a suspension of the state s gas use tax. Those taxes are collected at the distributor level rather than the pump, but Indiana drivers have already seen relief. The average price of gas in Indiana has dropped about 40 cents per gallon over the past week, according to GasBuddy. Meanwhile, the national average is down just 2 cents over the same period. Georgia has taken a similar approach. Gov. Brian Kemp (R) signed a bill in March suspending the state s motor fuel excise tax through May 19. Gas in Georgia was $3.98 per gallon as of Thursday, about 55 cents lower than the national average. A year ago, Georgia gas prices were roughly 30 cents below the national average, GasBuddy data shows. But gas tax holidays also come at a steep cost, limiting how often states are willing to use them. The tax breaks in Indiana are expected to cost state coffers $104 million and local governments $52 million, according to the Indiana Capital Chronicle. Other state leaders, including Florida Gov. Ron DeSantis (R) and New York Gov. Kathy Hochul (D), have resisted calls for gas tax holidays and questioned their effectiveness. Crude oil accounted for the largest share of what Americans paid at the pump in February — about 52 percent — while all taxes made up a much smaller share, roughly 18 percent, according to the Energy Information Administration. Because state gas taxes and fees vary widely, the impact of a state gas tax holiday would depend heavily on where drivers live. As of January, state taxes and fees on gas averaged about 33 cents per gallon. It s also not clear how much of a gas tax holiday — whether federal or state — would ultimately be reflected in prices at the pump, though De Haan said the majority of the savings would likely be passed on to consumers. If they don t lower their price, the station down the street will, or the station down the street from that station will, De Haan said, emphasizing that competition would push retailers to pass any tax savings through to drivers. The Penn Wharton Budget Model analyzed the impact of state gas tax holidays in 2022 and found that most of the savings were passed onto consumers at some point through lower gas prices. In Maryland, roughly 72 percent of the tax savings reached consumers, while in Connecticut, the figure ranged between 71 percent and 87 percent. The Bipartisan Policy Center recently created a calculator that allows drivers to estimate the impact of a gas tax holiday based on their state and vehicle. At the federal level, Trump s push for a gas tax holiday would require congressional approval and faces an uphill climb. The Committee for a Responsible Federal Budget says a federal gas tax holiday would cost billions each month and only marginally reduce consumer costs. Critics have warned that suspending the tax would deplete the Highway Trust Fund, which finances most federal spending for highways and mass transit. Copyright 2026 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Do gas tax holidays actually bring relief at the pump?

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