High Gas Prices Elicit Calls for Tax Breaks and Stimulus Payments.


Gas prices have risen significantly since Russia’s invasion of Ukraine began, putting further strain on customers who are already grappling with rising gas prices following a year of rapid inflation.

As a result, the Biden administration has been researching vigorously ways to compensate for the loss of Russian oil supplies, which the US banned last week. However, the majority of experts believe there is little the president can do in the immediate term to significantly cut gasoline costs. Despite Republican promises to increase drilling in the United States, analysts believe domestic production constraints are largely market-driven, and it would take months for new wells to begin producing enough oil to alter supply levels. At the same time, many Democrats view green energy options as a long-term strategy for reducing reliance on oil rather than an instant substitute.




With few alternatives for resolving the underlying supply issues, politicians have proposed a variety of potential solutions to assist Americans in bearing the cost of rising gasoline. Maryland’s governor and state legislature have agreed to suspend state gas taxes temporarily, a proposal that has been floated in several other states and at the federal level. Gov. Gavin Newsom of California recently proposed a tax rebate “to put money back in the wallets” of individuals struggling to afford high fuel expenses. Certain progressive Democrats have proposed a new system of regular stimulus payments that would be funded by a hefty tax on oil corporation profits.

Why is there controversy?

Each of these concepts has a number of proponents and detractors. There is widespread agreement, however, that while any of these will help marginally, meaningful relief for consumers would not arrive until gas prices fall.

The idea behind a gas tax holiday is straightforward: If additional taxes are not added to the fundamental prices, gas will be less expensive. Federal gas taxes are approximately 18 cents per gallon, while state taxes range from 17 cents to 51 cents per gallon. However, sceptics argue that those savings would not necessarily be passed on to consumers, but rather to the oil business and gas stations. Additionally, there are fears that a tax holiday would deplete financing for vital government programmes, such as highway renewal.

Direct stimulus proponents argue that direct stimulus, whether through refunds or checks paid by a tax on oil company profits, is the best method to ensure that money goes directly to those severely hurt by rising gas costs. Skeptics contend that any proposal that disincentivizes oil production investment will further prolong the supply shortfall.

According to some environmentalists, each of these proposals marks a step back from the ultimate aim of ending reliance on fossil fuels. Many argue that the greatest way to assist Americans cope with rising gasoline prices is to do everything necessary to reduce people’s reliance on automobiles in the first place.

What comes next

With so much uncertainty surrounding the oil supply chain, experts are hesitant to forecast how high gas prices will rise and when they will begin to fall. While many anticipate an increase in fuel prices moving into the summer months, a variety of variables — like the potential of peace in Ukraine or another large wave of COVID-19 — might cause them to fall.


A gas tax holiday may be the only viable alternative for immediate price reductions.

“If the fossil fuel giants can persuade Putin to cease his conflict in Ukraine, so ending sanctions against Russia and restoring the country’s ability to sell crude oil, then Big Oil needs to get moving immediately. However, they lack this capability, and natural gas prices are governed by the worldwide price of crude oil. What is realisable? Suspend the gasoline tax.”

Gas tax revenues are far too critical to the nation’s long-term aspirations.

“The federal gas tax is a crucial, if deteriorating, policy that Congress should strengthen, not weaken. … Suspending the gas tax would be another step toward dismantling the link between how much people use roads and how much they pay for their maintenance. One unintended consequence would be increased driving — and thus increased wear and tear on the nation’s infrastructure. Another would be an increase in the amount of greenhouse gases in the atmosphere.”

Limiting corporate greed will assist in preventing prices from increasing excessively.

“What is causing the increase in gasoline prices? Oil companies are doing a heinous act of profiteering. While working-class Americans struggle to make ends meet at the pump, Big Oil profits soar.”

Profit taxation would exacerbate price increases.

“Gasoline prices are already exorbitantly high. Imposing extra taxes on oil businesses raises their costs — and as ECON 101 reminds us, this is a textbook prescription for a supply decline. When supply is reduced, prices increase even more!” — Washington Examiner’s Brad Polumbo

Tax rebates might assist Americans in coping with increased costs across the board, not just for gasoline.

“A tax rebate is a fine idea, but it must be extended broadly to benefit all poor Californians. Call it the gas and grocery rebate, and it should be universally acceptable.”

Keep it easy and simply donate money to folks.

“Families require assistance immediately. The quickest and most efficient approach to safeguard disadvantaged citizens from the effects of global economic instability is to provide them with a direct payment through the IRS, similar to the three stimulus cheques that were distributed to families during the pandemic’s height. However, unlike stimulus cheques, these payments should be made directly to low- and moderate-income households.” — CNN’s Mark Wolfe

Indeed, high gasoline costs are beneficial.

“Rising gas prices encourage consumers to travel less and invest in more electrified and fuel-efficient vehicles. Discouragement of fossil fuel consumption and reduction of greenhouse gas emissions should remain top priority for the state. The cost of climate change is far more than the rising expenditures at service stations.” — San Jose Mercury News editorial

Legislators must not overlook the demand side of the equation.

“Demand must be reduced. Now. There are simple steps to take: Reduce highway speed restrictions; persuade consumers to turn down their thermostats somewhat; and promote public transit use by lowering ticket prices or allowing people to ride for free on weekends.” — Bloomberg’s Javier Blas

Democrats should avoid enacting harmful policies as a result of political pressure.

“Therapists advise against making significant judgments when one is emotionally charged. Democrats should take this warning to heart and refrain from proposing reckless measures to reduce gasoline costs.”

“Democrats looking for a quick remedy — such as a proposed gas tax holiday — will likewise be disappointed. The primary issue is not domestic oil supply or taxation. It’s how much Americans desire and demand affordable gasoline, a problem that the United States has exacerbated as an automobile-centric nation.”



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The government should do everything possible to persuade people to abandon their automobiles.

“Here’s an idea: Pay people to dispose of their autos. A federal repurchase scheme for gas-guzzlers would be just one component of the urgent, required work of decentering autos in American life — a reasonable transition away from our automobiles — but it is a surprisingly realistic one.”

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