Editorial: Gas tax holiday could end up costing us even more

By The Herald Editorial Board

President Biden’s reasoning in asking Congress to grant a three-month gas tax holiday — and at the same time asking states to join in the respite — is understandable. At the start of the summer season, gas prices have topped $5 a gallon nationwide and are about $5.50 a gallon in Washington state. Diesel prices are even higher.

How many of us now fill up and dread looking up as the numbers flash by?

Although U.S. presidents have little to next to no control over the price and supply of energy — ask Presidents Nixon, Ford and Carter about their experiences — Biden may have already hit the limits of executive control by tapping the nation’s petroleum reserves, allowing more ethanol to be blended into gasoline and urging oil companies to increase production. All to little noticeable effect. A gas tax holiday appears to be the last trick left.

The proposal to lift the federal tax on fuel — 18 cents a gallon for gasoline and 24 cents a gallon for diesel — while asking states to do the same with their typically higher taxes, sounds like it should save motorists a least a few dollars on a fill-up, offering some respite from the greater inflationary pain. Washington drivers, for instance — if both federal and states taxes were suspended — should expect to save a total of 57 cents a gallon. So, for a 15-gallon fill-up, that should mean a savings of $8.55 a tank, right? Notice, that’s a “should,” not a “would.”

There’s a reason economics is called “the dismal science.”

Motorists would likely see only a minimal drop in the price of gas. A study by experts at the Penn Wharton Budget Model found — estimating savings for a longer 10-month federal gas tax holiday — that between 42 percent and 80 percent of the suspended tax would be passed on to consumers, with the rest benefiting oil companies. Even at that rate of savings, the average motorist would save between $16 and $47 over that 10-month period, the study found.

Another Penn Wharton study looked at three states that enacted state gas tax holidays last October: Maryland, Georgia and Connecticut. As of mid-May, compared to a national average of $4.72 a gallon, Georgia motorists were paying $4.34 a gallon, but those in Maryland and Connecticut were paying $4.84 and $4.82 a gallon respectively.

And any break in price could prove to be short-lived.

Economists also said a somewhat lower price of gas — while easing the minds of motorists — could also lead them to feel like they could increase their consumption. During a time when oil companies appear either reluctant or unable to significantly increase production — and why should they when they’re raking in surging profits? — increased consumption now would only increase demand and drive up prices yet again.

Also to be considered is the loss in revenue for the federal government and for state governments that tag along with the proposal. For the three-month break that Biden seeks, the federal Highway Trust Fund — used to fund highway and bridge projects and mass transit — would lose about $10 billion. Biden administration officials said that Congress could back-fill those loses from other sources, but then those “other” unspecified sources would take the hit.

And, nine months after the Biden administration and Congress celebrated a bipartisan victory in adopting the Infrastructure Investment and Jobs Act, so desperately dipping into its funding for a quick fix to gas prices appears to disregard the importance of what those investments should mean for the nation.

A suspension of the gas tax in Washington state was proposed by Republicans in the state Legislature in March but a vote to bring the bill up for debate failed. Democrats, in control of both chambers, cited suspicions that such a tax break would largely benefit oil companies, not consumers. Instead, the state Legislature passed a landmark transportation package that now needs every cent that comes in through state and federal sources if it is to deliver on its promises.

And, even if temporary, would motorists come to expect tax holidays every time prices rise?

There are options to cut costs at the gas pump, but not anything in the control of president, Congress or oil companies. These steps are up to us as consumers.

As we saw during the pandemic, demand for petroleum products fell worldwide, and the price for crude oil plummeted, followed by gas prices. Using less gasoline not only cut our own costs, it decreased demand and drove down prices for fuel, keeping them low until our economy and our activity bounded back.

We have alternatives — if not in all circumstances, in most — to reduce the amount of gas we use, including using public transit, walking and cycling more often; by reducing our speed when we drive, avoiding jack-rabbit starts and stops and reducing idling in drive-throughs; checking tires for correct pressure; planning out our errands and shopping to avoid back-tracking and unnecessary trips; buying more fuel-efficient (or even electric) vehicles; and working from home, as many still are.

And all of the above, while saving us money, will also reduce our consumption of fossil fuels and the generation of greenhouse gases that are contributing to the acceleration of climate change and its increasingly inescapable effects, including droughts, polar and glacial ice melt, rising seas, loss of farmland and wildlife habitat, water scarcity and an increasing pace of weather disasters, including heat waves, flooding, storms, wildfires, pandemic disease and more.

None of those solutions are as dramatic as a gas tax holiday, but they promise a better shot to save money — and the planet — without the unintended consequences.