Federal and State Gas Tax Holiday Proposals

In response to the spike in motor fuel prices over the last two weeks, there have been proposals by some policy makers to suspend the collection of gas taxes to provide relief to motorists.

Governor Tom Wolf signed onto a letter with five other Governors urging Congress to enact legislation that would suspend collection of the 18.4 cent per gallon federal tax until the end of the year.

            State Senate President Jake Corman (R-Centre) has proposed reducing the state motor fuel tax by nearly 50%.

The Corman proposal would transfer $500 million of federal COVID relief money to fund state police operations (which is a major draw on the state’s Motor License Fund) to fill the gap in transportation funding that would result from the suspension of collecting part of the gas tax.

A spokesman for the Governor raised concerns that lowering the 58.7 cent per gallon state tax would have a serious detrimental impact on highway and bridge programs.

It is unclear as of this writing whether the Corman proposal will be considered by the Senate. Senator Corman is a candidate for Governor in this year’s GOP primary.

            Other organizations have raised similar arguments, including the Pennsylvania Chamber of Business and Industry, the state federation of AAA clubs, and the Pennsylvania Motor Truck Association.

The PPA has communicated to some key officials that the decision should take into account the unintended consequences a gas tax holiday could cause– such as the complexities this move would create in the revenue collection system.

Another potential development might be a run on product if large fuel users would stock up to take advantage of the temporary gas tax suspension.

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