Gas tax suspensions pose threat to infrastructure funding

Key Takeaways

As the war between Russia and Ukraine combines with the post-pandemic recovery to increases gas prices to near-record highs in some parts of the country, states are considering temporary suspensions of their fuel taxes to offer relief to consumers.

That tactic, however, done wrong, could have long-term repercussions for infrastructure funding, much of which is funded by gas taxes.

Maryland and Georgia thus far have approved temporary suspensions, but, with a caveat in Georgia, have also received assurances from their governors that the revenue will be backfilled.

“It’s not a long-term solution, for sure,” said Todd Kinney, Clinton County Iowa engineer and president of the National Association of County Engineers. “If they did a gas tax holiday in Iowa, you would see a direct decrease in your funding based on whatever taxes weren’t collected. So it would be very hard for the Iowa legislators to backfill that money. It’s not like the federal Highway Trust Fund, where they could just throw money into it.”

Maryland’s (36 cents per gallon) state gas tax suspension will last 30 days and Georgia’s (29.1 cents per gallon) will last roughly 2.5 months. Governors Larry Hogan (R-Md.) and Brian Kemp (R-Ga.) have pledged to backfill lost revenue from state general funds, but Association County Commissioners of Georgia Executive Director Dave Wills said the fate of local maintenance improvement grants to counties and cities was still up in the air.

Those grants are drawn from 10 percent to 20 percent of the preceding fiscal year’s gas taxes, and Georgia’s gas tax suspension ends at the end of the fiscal year on June 30.

 “By the time [this fiscal year] concludes on June 30th of this year and will be the basis for the appropriations that were made in the 2023 budget, we won’t actually know what results to expect for funding we’ll receive until the next legislative session,” he said. Gov. Glenn Youngkin (R-Va.) has called for a three-month suspension of the state’s gas tax, which is 26.7 cents. Gov. Gretchen Whitmer (D-Mich.) plans to veto the Legislature’s passage of a 27-cent-per-gallon tax suspension. The semantics surrounding gas taxes bely their nature as user fees that fund infrastructure, and Kinney said that muddies the issue for many consumers.

“It’s basically a user fee, so it’s one of the more equitable fees or taxes you’ll pay,” he said. “In a lot of places, it’s constitutionally protected and has to be spent on roadways,” he noted. “It’s not like a property tax or income tax or something where you really don’t know where that money is going. Fuel excise taxes are there for one purpose and one purpose only.”