States Offer Tax Relief as High Gas Prices Hit Voters
About one-third of U.S. states are implementing fuel tax holidays or reductions to ease costs for consumers and industries as gas and diesel prices remain a top concern ahead of midterm elections.
State officials across the U.S. are responding to soaring gas and diesel prices, largely attributed to the war in Iran, by offering fuel tax holidays and other measures. These actions aim to alleviate costs for consumers and key industries, with affordability emerging as a significant voter concern in the lead-up to the midterm elections.
In Ohio, lawmakers recently passed a 90-day state gas tax holiday with bipartisan support. This move brings the total number of U.S. states offering some form of fuel tax relief to about one-third, with many implementing measures in the past week, according to an Associated Press review. Some states have suspended fuel taxes entirely, while others have enacted temporary reductions. Relief has also been specifically targeted at farmers, loggers, and other professionals who rely on specialized diesel fuel.
As of Wednesday, the average price for regular gasoline was $4.43 per gallon, a roughly 50% increase since the conflict in Iran began. Diesel prices stood at $6.41 per gallon, nearing a record high set the previous week, according to AAA.
Ohio's legislation proposes suspending the state's 38.5-cent-per-gallon gasoline tax and 47-cent-per-gallon diesel tax through the end of the year. The state plans to use $725 million from its general fund to cover road and bridge maintenance, typically funded by these fuel taxes. The push for the tax holiday in Ohio saw Republican legislative leaders recall lawmakers amid calls for relief from both Democratic gubernatorial candidate Amy Acton and Republican Vivek Ramaswamy. Accusations of political maneuvering arose as Democrats criticized Ramaswamy for taking credit for Acton's proposal, while Ramaswamy's campaign asserted their plan had more substance.
Georgia was the first state to suspend its fuel taxes in March following the surge in prices. Republican Gov. Brian Kemp extended this break into June and recently announced a 30-day resumption of the holiday. Indiana Gov. Mike Braun, a Republican, has extended a fuel tax exemption multiple times since spring, with the current version set to expire on October 5.
Other states have also introduced tax breaks. Utah has a six-month, 6-cent reduction in its fuel tax in effect until year's end. Illinois and Kentucky have implemented less substantial measures, delaying scheduled fuel tax increases. In the past week, governors in Alabama, Arkansas, Louisiana, Missouri, Nebraska, North Carolina, North Dakota, Oklahoma, and Texas have taken steps to provide fuel tax relief specifically for the agricultural sector during the harvest season.
These executive orders often target dyed diesel fuel, which is typically used for off-road machinery and exempt from state taxes. The orders temporarily waive enforcement rules, allowing this tax-exempt fuel to be used in on-road vehicles, a move some governors noted could help reduce the cost of transporting crops and potentially impact grocery prices.
On a federal level, the Environmental Protection Agency permitted an earlier-than-usual switch to cheaper, winter-blended fuels beginning September 1, a change that could save up to 15 cents per gallon. California, however, has its own stricter environmental fuel standards. While Democratic Gov. Gavin Newsom ended the summer fuel requirement, citing a state law that mandates reevaluation of regulations during significant retail price increases, summer blends are still required in many parts of the state through October 31.
Experts caution that the effectiveness of these state-level tax breaks may not always meet consumer expectations. Fuel price volatility can cause costs to rise even as tax rates fall. Additionally, taxes are often levied at the wholesale level, meaning changes may not immediately reflect at the retail pump. Jeff Lenard, a spokesperson for the National Association of Convenience Stores, explained that customers anticipate immediate price reductions, but the process is more complex, involving inventory and upstream cost changes before retailers can adjust pump prices.