Insights | Blog
Forefront Friday – Gas Tax Holiday
The fourth of July is fast approaching and according to AAA, nearly 48 million Americans are expected to travel over the holiday, and 42 million of us are expected to travel fifty miles or more. Whether we pack up the car for the entire weekend or travel across town for a BBQ, most of us are acutely aware of the high cost of gasoline.
The national average price for gas earlier this week was $4.955 a gallon, with California being the most expensive at $6.37 per gallon. Here in Michigan, we have the 11th highest gas prices, averaging $5.13/gallon. On average, crude oil costs make up about 50% of the cost at the pump, while federal and state taxes contribute around 14% of the total.
State gas taxes vary from state to state, with Pennsylvania being the highest at $.58 a gallon, while Alaska is the lowest at $.09. Here in Michigan, we have the 24th highest tax at $.27 a gallon. Recently President Biden proposed a three-month suspension of the $.18 per gallon federal gas tax. Biden also urged states that have not already done so, to suspend their gas taxes, all as a way to provide some relief at the pump.
Research released last week by the Penn Wharton Budget Model found that the recent state gas tax suspensions were effective in lowering consumer prices. However, depending on the state, only 58 to 87% of the tax savings were actually passed on to consumers. Only time will tell, but if approved, we all hope to see 100% of the federal gas tax savings in our wallets. Although $.18 a gallon is not huge, it should pay for a few extra hot dogs over the holiday. Enjoy the fourth and stay safe.