June 28, 2022

Federal Gas Tax Holiday Not Picking up Speed Among Consumers

Only 39% of consumers agree that the federal gas tax holiday will be beneficial for their budget.

With the average price of a gallon of regular unleaded gasoline hovering near $5 and Americans squeezed by inflation in other areas, leaders of all stripes have offered varying solutions. Fighting price-gouging. Increasing domestic oil production. Lowering or pausing gas taxes.

In fact, President Joe Biden has called on Congress to suspend the 18-cent-per-gallon tax the federal government charges on a gallon of gas (24 cents for a gallon of diesel) through September to ease the burden on consumers.

While it’s too soon to say whether the proposal will gain traction in Congress, we wanted to understand how much consumers think the holiday would positively affect their lives, so we asked nearly 1,000 U.S. adults about their views.

Key findings:

  • When asked if the gas tax holiday would have a positive impact on their families, 39 percent agreed, while 36 percent disagreed.
  • Disagreement with the gas tax holiday rises with age: 54 percent of Baby Boomers don’t believe it would positively affect them compared to just 19 percent of Gen Z’ers.
  • Suspending the federal gas tax and state taxes and fees on gas would have the biggest net positive impact on drivers in Pennsylvania, who would save about 15 percent of the cost of a gallon of gas in taxes and fees.

Consumers Expect Mixed Impact From Gas Tax Holiday

As we’ve touched on, while 39 percent of people told us a federal gas tax holiday would have a positive impact on their families, a similar percentage (36 percent) disagreed with that statement, while 26 percent were uncertain.

From a hard numbers standpoint, it’s easy to see why people wouldn’t see a huge upside to the gas tax holiday or would be uncertain about it. On a 16-gallon tank of gas at the national average of $4.88 per gallon, a driver would spend just over $78 to fill an empty tank. Removing the federal tax portion of that price would save just under three bucks.

However, Biden is also calling on states to consider suspending their gas taxes as well, including excise and sales taxes, or to hit pause on planned tax increases. This, too, would have a varying impact.

That’s because taxes and fees on gasoline vary from a high of nearly 67 cents per gallon in California to a low of about 15 cents per gallon in Alaska, according to a Tax Foundation analysis. We compared gas taxes and fees, including state and federal, to the average price of a gallon of gas today, according to AAA, and found that Pennsylvania drivers would see the biggest bang for the buck, with combined taxes and fees accounting for about 15 percent of a gallon of gas.

Federal and state gas tax holiday impact by state

State Federal taxes/state taxes & fees (in cents) % of per-gallon cost
Pennsylvania 76.7 15.49%
Illinois 77.56 14.31%
New Jersey 68.7 14.03%
Indiana 67.79 13.58%
California 84.98 13.47%
Florida 60.26 12.98%
New York 64.19 12.97%
Michigan 63.12 12.54%
Georgia 54.09 12.32%
Nevada 68.48 12.28%
Washington 67.4 12.27%
Hawaii 68.17 12.23%
North Carolina 54.35 12.01%
Ohio 56.51 11.66%
Maryland 54.1 11.18%
Virginia 52.4 11.14%
West Virginia 53.7 11.09%
Connecticut 53.75 11.06%
Rhode Island 53 10.84%
Wisconsin 50.9 10.84%
Alabama 47.21 10.53%
Iowa 48 10.42%
Oregon 56.83 10.34%
Minnesota 48.6 10.34%
Montana 50.75 10.24%
South Dakota 48 10.15%
Tennessee 45.4 10.09%
Vermont 49.28 9.96%
Nebraska 46.6 9.90%
Idaho 51 9.78%
South Carolina 42.75 9.70%
Arkansas 42.8 9.65%
Maine 48.01 9.59%
Kentucky 44 9.56%
Utah 49.41 9.53%
District of Columbia 46.8 9.29%
Kansas 42.03 9.16%
Massachusetts 44.54 9.05%
North Dakota 41 8.70%
Wyoming 42 8.62%
New Hampshire 41.83 8.59%
Louisiana 38.01 8.57%
Delaware 41 8.52%
Texas 38 8.40%
Mississippi 36.79 8.35%
Oklahoma 38 8.32%
Colorado 40 8.16%
New Mexico 36.88 7.85%
Missouri 35.42 7.72%
Arizona 37 7.01%
Alaska 32.98 5.92%

SOURCES: Tax Foundation, AAA

Younger Consumers, Democrats More Likely to Favor Gas Tax Holiday

The only age group where a majority of people said suspending the federal gas tax would positively impact their families were Generation Z, 51 percent of whom said a tax holiday would benefit them. Another 30 percent of this age group was undecided, also the highest number among any generational group.

On the other hand, 54 percent of Baby Boomers disagreed with the statement that suspending the tax would benefit their families and only 27 percent agreed. Indeed, support for the federal tax holiday fell and opposition rose with age.

Support/opposition for gas tax holiday by age group

Position Generation Z Millennial Generation X Baby Boomer
Support 51% 41% 31% 27%
Oppose 19% 32% 44% 54%

Republicans and Democrats, unsurprisingly, hold opposing views, though even among Democrats, the federal gas tax holiday is not overwhelmingly popular. Fifty-four percent of Democrats agree that it would positively impact their families, compared to just 24 percent of Republicans.

Conclusion

As we speed toward the July Fourth holiday weekend and gas prices continue their rise, leaders and advocates across the political spectrum have offered a variety of solutions. Our analysis shows that most consumers remain unconvinced about the short-term fix of suspending the federal gas tax. But this issue varies considerably from state to state, as does the impact of taxes and fees at the pump.

Methodology

We conducted an online survey of 991 U.S. adults about their views on President Joe Biden’s proposal to temporarily suspend federal tax on gasoline purchases. Our analysis of gas tax impact on prices uses data from the Tax Foundation and AAA; we calculated the per-state impact of federal taxes and state taxes and fees on the current (as of June 28) cost of a gallon of unleaded gasoline and the total resulting cost of a 16-gallon gas tank.