Great Lakes Wire

Some experts are warning against suspending the federal gas tax until the end of 2022, even as several Democratic governors such as Michigan Gov. Gretchen Whitmer have advocated for a federal gas tax holiday.

In an opinion article for The Hill, Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, said the gas tax holiday would be turning a blind eye to the real issues at hand.

"A gas tax holiday would exacerbate inflationary pressures and slow a needed transition to more energy-efficient and climate-friendly technologies, while cutting off a key source of infrastructure funding," MacGuineas said in the article. "It's a way for politicians to pretend they are making the situation better, when in fact they are making it worse."

Federal fuel tax rates are at $0.184 per gallon for gasoline and $0.244 per gallon for diesel, The IGEN Blog reported. In Michigan, the current state gas tax amount is $0.272 per gallon.

Whitmer, along with New Mexico Gov. Michelle Lujan Grisham, Wisconsin Gov. Tony Evers, Colorado Gov. Jared Polis, Pennsylvania Gov. Tom Wolf and Minnesota Gov. Tim Walz, sent a letter on March 8 to House and Senate leaders supporting the Gas Prices Relief Act, ABC 12 reported. If passed, the federal gas tax of 18.4 cents would be put on hold until 2023.

"A gas tax holiday would defund our infrastructure and worsen our nation's already precarious fiscal situation," MacGuineas said. "The federal gas tax currently helps fund highway and transit spending through the Highway Trust Fund. The Committee for a Responsible Federal Budget estimates that suspending the gas tax through the end of the year would reduce that revenue by roughly $20 billion, nearly halving the trust fund's revenue for the year."

Some argue that infrastructure needs still are not being met by gas taxes, especially with electric vehicles gaining traction, CNET reported. A gas tax holiday would only worsen the issue and ignore existing oil supply issues.

"Once the holiday ends (if it is allowed to end), inflation would be even worse than before it started," MacGuineas said. "Rather than countering the highest inflation rates seen in decades, suspending the gas tax in an overstimulated economy would boost inflation in 2023, as surging demand coincides with re-imposition of the tax. Remember, it was excessive tax cuts and spending that helped get us into this inflation mess; they aren't going to get us out of it."

Democratic governors, in their March 8 letter, said that the proposed legislation would see that the Highway Trust Fund is able to cover expenses by allowing the Department of Treasury replace the revenue lost by a federal gas tax holiday.

"Furthermore, the Infrastructure Investment and Jobs Act (IIJA) dedicated an additional $118 billion to the Highway Trust Fund, and the Trust Fund's capacity to finance the construction and maintenance of roads, bridges, and highways across the country would not be diminished by the legislation," the letter said.

Still, MacGuineas said that corporate greed would spoil even the best intentions of the bill.

"Oil producers and gas stations are likely to respond to the holiday by raising the pre-tax price of gasoline," MacGuineas said. "Indeed, the largest beneficiaries may well be oil producers that absorb the tax break before allowing some of it to trickle down to taxpayers."