MW Gas-tax breaks sound tempting at $4 a gallon. Too bad they don't actually work.
By Adam Hoffer
Suspending taxes may win votes - but the math doesn't add up for drivers
A gas-tax break ultimately hits taxpayers in other ways.
Providing a subsidy doesn't magically eliminate the cost of building and maintaining roads; it just moves that cost to taxpayers somewhere else.
Gas tax prices are soaring across the U.S. - currently above $4 a gallon on average - and lawmakers are naturally looking for ways to alleviate the pain at the pump. While gas tax holidays - which temporarily suspend fuel taxes to artificially lower the price of gas - are a politically welcomed intervention, taxpayers shouldn't be so quick to celebrate.
In a time of political and economic uncertainty, drivers should be aware that these gimmicks can be economically harmful. Pausing fuel taxes makes funding roads and highways more difficult, while doing nothing to address the underlying issues driving prices upward.
Georgia has become the latest target of this type of counterproductive measure. Gov. Brian Kemp, a Republican, recently enacted a 60-day suspension of the state's motor-fuel tax. Yes, gas prices are high now, but with roadway spending in Georgia on the rise, there could not be a worse time to lower the taxes that fund those very expenditures.
The extra cents you pay at the pump are used to fund roads and other transportation infrastructure, making them a perfect example of user-pays excise taxes. The cost corresponds to the benefit received. Drivers who use the roads pay for road construction and maintenance when they pay fuel taxes. When fuel prices increase - which can be caused by myriad factors including inflation, higher transportation costs and geopolitical risks - providing a subsidy doesn't magically eliminate the cost of building and maintaining roads; it just moves that cost to taxpayers somewhere else.
Suspending gas taxes when fuel prices are high isn't a new idea. Gas-tax holidays have been tried many times across the country. As recently as 2022, Congress considered a bill to temporarily suspend the federal gas tax due to high inflationary pressures and the war in Ukraine. But these subsidies don't work.
When the pain at the pump is palpable, shifting the cost of road construction and maintenance into indirect tax revenue streams is no way to solve the problem. As it currently stands, road use fees fall short of fully funding roadway systems in most states already, and governments are currently diverting funds from other sources.
Georgia is no exception. Last year, Georgia roadway user revenues covered only 38.3% of roadway spending, requiring the state to cover most of its transportation expenditures from its general fund.
Zeroing out the gas tax could divert more general funds to roadway spending - allowing the burden of paying for the roads to fall on all taxpayers, regardless of whether they actually use the roads. To make matters worse, while suspending the gas tax makes a great political headline, the price relief may be disappointing.
For starters, the average nationwide state gas tax rate is only about 40 cents per gallon. In addition to the statutory state gas tax, most states charge additional fees, and many states allow municipalities to tack on their own taxes. These policies all add onto the price consumers face at the pump and won't necessarily be suspended if a state issues a gas-tax holiday.
Producers also bear some of the burden of the gas tax. Academic studies suggest that producers pass through around 80% of the gas tax. This means that if a state suspends a 25-cent-per-gallon gas tax, prices at the pump might only fall 20 cents for consumers because producers pocket the other 5 cents.
Yes, gas taxes may soon become a tax of the past. Better policies have emerged, such as a vehicle miles traveled (VMT) tax, which can fully fund roads by charging drivers for their road usage. Most states and the U.S. Department of Transportation have begun exploring replacing the existing funding structure with a simpler VMT tax that better aligns use with costs and better approximates the real price of roads. A permanent transition away from gas taxes would be welcome, but Band-Aids don't fix potholes.
It's not unreasonable for drivers to be upset about high fuel prices and for policymakers to want to tackle the issue. When prices hit more than $4 a gallon for gasoline, only your smug neighbor with the electric vehicle is enjoying themselves. However, suspending a tax that disguises the externalities of driving is a shortsighted way of addressing the underlying issue.
Policymakers want to respond to rising fuel prices, and they should - just not in a way that hides, rather than eliminates, the problem.
Adam Hoffer is the director of excise tax policy at the Tax Foundation.
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-Adam Hoffer
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April 04, 2026 12:47 ET (16:47 GMT)
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