Should We Suspend Gas Taxes to Counter High Oil Prices?

The Issue:

The price of gasoline has spiked since the Russian invasion of Ukraine and politicians have been quick to call for a temporary suspension of gasoline excise taxes, either at the federal or state level. Already, three states – Connecticut, Maryland, and Georgia – have temporarily suspended their state excise tax.  As Connecticut Governor Ned Lamont put it, “With this bipartisan action, we are taking steps to provide some relief to consumers as they face rising prices due to a number of international dynamics and market instability that go far beyond our state." But is this really helpful? Is it good policy?  

Gas prices today are only slightly higher than their average value over the past thirty years when accounting for general price inflation.

The Facts:

Although they have seen a steep increase in a short period of time, gas prices today are only slightly higher than their average value over the past thirty years when accounting for general price inflation. Even with the recent spike, inflation-adjusted gas prices were higher in the spring and summer of 2008, and the majority of the months from 2011 through the summer of 2014 (see chart). The more unusual circumstance was the very low gas prices that followed this, in the five years beginning in February 2016. Moreover, the amount that the gas tax contributes to inflation-adjusted prices at the pump has diminished over time. The federal tax on a gallon of gas was last raised in October 1993. Since then, its value has fallen by nearly 45 percent – or, put differently, the 18.4 cents per gallon in 1993 translates to 35.9 cents per gallon in 2022 dollars.