Few States In US Begin Suspending Gas Taxes To Reduce The Burden On Consumers

As gas prices witness a surge across US, some states are contemplating suspending their gas tax.

Maryland's 36.1 cents per gallon tax will be suspended.

Connecticut will suspend its 25 cents per gallon tax until June 30.

Georgia will suspend its 29 cents per gallon tax until end of May.

Floria will suspend its 25 cents per gallon tax.

Average price of gas across US is currently hovering around $4.24, which is 48 per cent higher compared to the prices last year. A significant portion of that cost comes from taxes (both state and federal).

It is unclear if this move by some states in US is good in the long term. Considering the uncertainly in global energy sector, particularly due to the ongoing war in Ukraine, it is somewhat unlikely that the prices will drop soon. These temporary tax suspensions may change the expectation of consumers and if prices shoot up again, the consumers might experience some form of dismay.

Another underrated problem with these kind of moves is the possibility of surge in demand. It is always likely that decrease in gas prices may lead to an increase in demand.

In a time when gas supply is tight, incentivising driving is short sighted. It might in the end prolong the problem instead of solving it.

Of course, policy doesn't exist in a vacuum, politics is the forest in which the flower of policy blooms. If no moves are taken to ease the perceived burden on consumers, people might view their representatives in government as uncaring and disconnected.

California is toying with a different policy. The policy is - sending cash to people directly and to nudge them towards public transit. Governor Gavin Newsom's policy proposes $400 to vehicle owners in the state coupled with free public transit for 3 months. This is to incentivise car owners to keep their vehicles in the garage and rely on public transit.

The hurdle with this policy is the fact that California has a notoriously shoddy public transit infrastructure.