Diesel prices have increased this week by more than 10 cents in most regions, according to the ProMiles.com report released Aug. 14.
The weekly report showed an increase
May 19, 2024 8:12 pm
In a bold move to provide relief to its residents amid soaring gas prices and economic turmoil, Georgia Governor Brian P. Kemp recently declared a State of Emergency in the Peach State, sparking the temporary suspension of the state’s excise tax on motor and locomotive fuel. This executive order, which went into effect on September 13, 2023, and will remain active until October 12, 2023, aims to alleviate the financial burden on Georgians grappling with escalating fuel costs.
According to Governor Kemp’s office, this tax suspension will translate into substantial savings for Georgians. For each gallon of gasoline, residents will pocket 31.2 cents in savings, while diesel fuel users will enjoy a 35-cent reduction per gallon. It’s a welcome respite for consumers who have been feeling the pinch at the pump due to rising gas prices.
This isn’t Georgia’s first attempt at a gas tax holiday. In 2022, the state successfully implemented a gas tax suspension that spanned from March through December, resulting in impressive savings of approximately $1.7 billion for its residents. The decision garnered favorable reviews and prompted Governor Kemp to revisit the strategy in 2023 as gas prices continued to escalate.
The move by Georgia mirrors actions taken by several other states in response to the gasoline price crisis. In 2022, Maryland’s Governor Larry Hogan introduced a 30-day gas tax holiday, while Florida implemented the Florida Motor Fuel Tax Relief Act, reducing the tax rate on motor fuel by 25.3 cents per gallon for the entire month of October. Connecticut, however, chose a gradual approach by phasing in the gas tax over the first half of 2023.
To comprehend the impact of gas tax holidays, it’s essential to understand how gas taxes function. Unlike sales tax holidays, where consumers see immediate savings, gas tax holidays primarily affect the wholesale level of gasoline distribution. Suppliers initially pay the state gas tax when purchasing gasoline for resale, and this cost is typically passed on to consumers as part of the per-gallon price. Gas tax holidays necessitate sellers to apply for refunds, with the expectation that these savings will ultimately reach consumers.
However, studies, such as one conducted by the Wharton School, have revealed that gas prices do not consistently drop by the full amount of the suspended tax. This discrepancy is due to the fact that savings from gas tax holidays are not mandated to be passed along by suppliers. As a result, the impact on prices varies from state to state.
In the case of Maryland, there was an initial and statistically significant decline in gasoline prices during the tax holiday. However, after the holiday concluded, gas prices in Maryland were higher than they would have been without the holiday. In Georgia, the price decline was more gradual, while Connecticut experienced an immediate drop followed by a slow increase in prices.
Gas tax holidays, although popular with taxpayers, have not been without criticism. Detractors argue that these holidays disrupt the natural balance of supply and demand in the gasoline market. Typically, when supply decreases, prices increase, but gas tax holidays create artificial incentives for increased consumption, which can exacerbate supply shortages.
Another concern is that these holidays reduce the funds available for state infrastructure projects, such as road improvements. This shortfall can be especially problematic for states facing budgetary constraints, although many states in 2022 benefited from federal pandemic relief funds and increased sales tax revenue.
Currently, California boasts the highest gas tax rate in the United States at a staggering 77.9 cents per gallon, which includes both sales and excise taxes. This increase was the result of the 2017 Road Repair and Accountability Act, which annually adjusts transportation-related taxes, including the state excise tax on fuel, for inflation.
Following California, states like Illinois, Pennsylvania, Indiana, and Washington impose high gas tax rates. Conversely, taxpayers in Alaska, Missouri, Mississippi, Hawaii, and Arizona enjoy the lowest gas tax rates in the country.
On the federal level, President Biden proposed a fuel tax holiday in 2022, but this idea failed to gain Congressional support. Currently, the federal gas tax stands at 18.4 cents per gallon (24.4 cents per gallon for diesel), a rate that has remained unchanged since 1993.
As gasoline prices continue to climb, consumers across the United States are feeling the pinch. According to AAA, the average cost of a gallon of regular gas nationwide is $3.848. These rising prices can be attributed to the increase in the price of oil, the primary component of gasoline. OPEC’s decision, notably Saudi Arabia’s commitment to extend voluntary production cuts through the end of the year, has further constrained the supply of oil, potentially driving up oil prices if demand remains high.
Additionally, the recent surge in inflation, largely fueled by higher gas prices, has contributed to the overall increase in consumer costs. According to the Department of Labor, gasoline’s impact on the inflation index has been significant, accounting for over half of the price surge.
Georgia’s decision to declare a State of Emergency and suspend its gas tax in response to soaring gasoline prices represents a tangible effort to provide immediate relief to its residents. While gas tax holidays have their critics, they offer a temporary reprieve for consumers grappling with financial challenges brought about by rising fuel costs. As states grapple with the ongoing volatility of gas prices and economic uncertainties, the debate surrounding gas tax holidays is likely to persist on both the state and federal levels.
Diesel prices have increased this week by more than 10 cents in most regions, according to the ProMiles.com report released Aug. 14.
The weekly report showed an increase
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