Summary

Summary (continued)

  • South Carolina Gov. Henry McMaster said the state gas tax provides about $800 million yearly and that suspending it is a “sort of knee-jerk reaction.”

As gasoline prices topped $4 a gallon nationally amid the war in Iran, some federal and state officials urged temporarily reducing motor fuel taxes to ease costs for motorists. But in several states, lawmakers and governors have pointed to challenges in how much a tax cut would translate into lower prices at the pump and whether states can replace the money that taxes typically provide for transportation projects.

Georgia and Utah moved first, taking different approaches to the same pressure. In Georgia, Republican Gov. Brian Kemp signed a measure on March 20 that suspended the state’s 33-cent-a-gallon gas tax for 60 days. In Utah, Republican Gov. Spencer Cox signed a law that trimmed 6 cents from the state’s 38-cent-a-gallon fuel tax, but the six-month reduction will not begin until July 1.

Even supporters of tax relief have faced a practical question: how directly does a gas tax suspension reduce what drivers pay? Over the past five years, retail stations charged consumers an average of 38 cents per gallon above wholesale prices, according to Jeff Lenard, a spokesperson for the National Association of Convenience Stores. Lenard said station profits after expenses often are less than half that amount, and he said the daily price for a barrel of oil can swing dramatically during the Iran war—sometimes by an equivalent of around 40 cents a gallon.

That context has fed skepticism that tax changes automatically produce relief. Florida Gov. Ron DeSantis, who previously approved a gas tax suspension in 2022, warned in March that the state’s ability to influence fuel prices is limited. “Our ability to influence the fuel prices are really marginal at best,” DeSantis said, adding: “I don’t think the consumer really felt relief.”

Other states have also weighed the longer-term fiscal tradeoffs of pausing a revenue stream. California charges a gas tax of 61 cents per gallon, plus additional fees, and AAA reported that the state’s average retail price was $5.89 per gallon on Wednesday. Several Democratic and Republican gubernatorial candidates in California called for suspending the gas tax, but the proposal had not gained traction in the Democratic-led Legislature, where some lawmakers expressed concern about replacing the lost revenue.

In Maryland, a separate push for relief ran into budget constraints. Republicans advanced a plan to suspend the gas tax for 30 days, but the Democratic-led General Assembly rejected it. A spokesperson for Democratic Gov. Wes Moore said a one-month suspension could have blown a $100 million hole in the state’s transportation budget while the administration was already cutting spending and shifting money to cover a projected shortfall in the overall state budget. The spokesperson, Ammar Moussa, said “The best way to bring prices down is to address the source of the pain,” citing the Iran war.

The debate also reflects uncertainty about how long the conflict affecting energy markets will last. Since the war began on Feb. 28, Trump has said it could be over soon while also threatening to widen the conflict. Against that backdrop, states that suspend gas taxes have faced a question of whether they can afford to do so without endangering planned transportation work.

Connecticut and South Carolina provided two examples of the budget calculus lawmakers discussed. In Connecticut, Democratic state Senate leaders said they had suggested that Gov. Ned Lamont could draw on roughly $330 million remaining in an emergency fund intended to respond to federal government actions that create hardship for families. Senate President Pro Tem Martin Looney and Majority Leader Bob Duff said in a statement that “The fund was created precisely for situations like this: when federal actions create hardship for Connecticut families,” and Lamont’s spokesman said the governor was willing to work with lawmakers on “a smart and strategic pause to the state’s gas tax.”

South Carolina’s debate centered on the scale of money gas taxes generate for construction and maintenance. Gas taxes generally pay for building, expanding and repairing roads and bridges, and officials said suspending a gas tax would mean less money for transportation projects unless funds move from elsewhere. In South Carolina, the state gas tax provides about $800 million yearly, supporting nearly $7 billion of projects, Gov. Henry McMaster said. McMaster dismissed the suspension idea as a “sort of knee-jerk reaction,” adding: “We’d like them all to be lower and lower,” but “that’s one we should not take any money out of.”

Associated Press writers Jeffrey Collins, Susan Haigh and Brian Witte contributed to this report.