Skip to Content
Tally logo

News: Two States Pause Fuel Taxes, and Others May Follow

As fuel prices surge, states pause taxes. Here’s how this may impact you and the economy as a whole.

Justin Cupler

Contributing Writer at Tally

April 1, 2022

AAA says the average gallon of regular gasoline is up to $4.24, a $1.38 increase compared to just one year ago. With these surging prices pinching drivers' wallets, Maryland and Georgia have suspended taxes on fuel, and more could follow suit to help relieve the pain at the pump. There is also legislation to suspend the federal fuel tax to ease the growing cost. 

Let’s explore the savings, the overall impact of the price cuts and other ways the government is trying to lower fuel costs. 

Savings will be minimal

Cutting the state fuel tax saves Maryland Drivers only 36.1 cents per gallon on gasoline and 36.85 cents per gallon on diesel. Georgia drivers get even fewer savings at 29.1 cents per gallon on gas and 32.6 cents per gallon on diesel.

Maryland’s gas tax holiday will last 30 days from its enactment on March 18. Georgia’s tax break will last through May 31, giving drivers longer-term relief. 

Maryland Gov. Larry Hogan told CNBC that the tax cut will save the average Maryland driver $15 in 30 days. 

There is legislation on Capitol Hill to create a federal gas tax holiday. Those savings would be even smaller, as the federal gas tax is only 18.4 cents per gallon. 

Negative impact could be significant

The downside to a gas tax holiday is lost tax revenue and Maryland stands to lose $100 million in revenue during the tax holiday. 

Fortunately, most states are running on budget surpluses thanks to increased sales tax and income tax revenue from boosted incomes and spending amid the pandemic. However, the federal government has been stuck in deficit spending throughout the pandemic, making the loss of fuel tax revenue more significant. 

Much of this federal and state fuel tax revenue goes toward infrastructure.


Russian oil ban is making an impact, but it’s limited

Even though gasoline prices already rose $1.30 per gallon on average during the 16 months leading up to the Russia-Ukraine war, there’s no doubt this has put more strain on prices. President Biden already placed a ban on all Russian imports, including oil. 

Fortunately, the U.S. gets only 8% of its oil from Russia, the third-largest oil exporter behind the U.S. and Saudi Arabia. Our reliance on Russian oil has risen, but our primary sources remain Canada, Mexico and Saudi Arabia. 

The Biden administration has also further mitigated oil price increases by authorizing the release of more than 90 million barrels of crude oil from the Strategic Petroleum Reserve this year. 

The U.S. is looking at other partners to replace Russian oil, such as Saudi Arabia, Venezuela and Iran. However, there is pushback, as this would involve dealing with other autocratic regimes while punishing Putin

High gas prices are likely the norm — for now

Like any commodity, demand fuels price increases, and the crude oil used to make gasoline is no exception. Throughout 2021, the gasoline demand surged along with the American economy, causing the price of crude oil to surge. This led to the dramatic increase in fuel prices we’ve seen in the past year. 

Because this price surge is mostly based on the gasoline demand, we’re likely to deal with these gasoline prices until demand cools. Unfortunately, cooling demand for gasoline generally indicates a cooling economy too

For now, the tax holidays are the only surefire option for some relief, albeit small.