Money Talks News may earn commission or revenue through links in the content below. Our editorial team independently selects all products. Compensation does not influence our recommendations.
Ask Donald Trump whether he’ll suspend the federal gas tax, and here’s the answer you get: “we’re thinking about that.” (1)
He said it Tuesday, when a reporter asked whether the tax would be suspended. Gas was averaging $4.37 a gallon nationally, according to AAA, up from $3.12 a year earlier. (1)(2)
I’m a CPA, and I’ve been writing about money for more than 35 years. When a politician floats a tax break, the first thing to do is get out a calculator.
The federal tax is 18.4 cents a gallon on gas and 24.4 cents on diesel. (2) And when states tried their own gas tax holidays in 2022, drivers didn’t get the whole cut at the pump. (3)
So before you start planning what to do with the savings, here’s what a gas tax holiday would really be worth to you — $2 to $3 a tank, at best — and 6 things to know before you count on it.
1. The best case is $2 to $3 a tank
Newsweek ran the numbers assuming every penny of the 18.4-cent tax came off the pump price. A 10-gallon fill-up would save $1.84. A 15-gallon fill-up would save $2.76. (2)
Over a year, that’s $92 if you buy 500 gallons and $184 if you buy 1,000. (2)
Now my math. Gas is up $1.25 a gallon from a year ago. If you buy 500 gallons a year, that’s $625 more than you paid last year. Even a full holiday would give back less than 15% of that.
2. You probably won’t get the whole 18.4 cents
April research from the Bipartisan Policy Center says a pause would likely lower prices 10 to 16 cents a gallon — not the full 18.4. (1)
That fits what happened in 2022. When Maryland, Georgia and Connecticut suspended their own gas taxes, the Penn Wharton Budget Model found up to 72% of the savings reached drivers in Maryland, 58% to 65% in Georgia and 71% to 87% in Connecticut. (3)
And the price cuts often didn’t last for the whole holiday. (3) At 10 cents a gallon, a driver who buys 500 gallons would save $50 over a full year.
If you want a discount you can actually count on, look at apps, not at Washington. Upside is a free app that pays you real cash — up to 25¢ a gallon — at stations you already use, including Shell, BP, and Exxon.
Claim an offer, pay with your usual card, and the cash back lands in the app. It stacks on top of your credit card rewards, and you can cash out to PayPal, your bank, or gift cards.
Two-car family? That adds up fast. Start earning on your next tank.
3. It takes Congress — and Congress has left town
A president can’t suspend the federal gas tax on his own. Pausing it would take an act of Congress, which Bloomberg calls an unlikely prospect, with the House and Senate already gone from Washington to campaign. (1)
Trump has backed a temporary suspension before. (1) Talking about it is free. Passing it is another matter.
My read: don’t put a gas tax holiday in your budget until it’s signed into law. Until then, it’s a headline, not a refund.
One thing before we keep going — the financial world is louder and dumber than ever. Hot takes everywhere. Almost none of it is worth your time. I’ve spent 35+ years cutting through the noise so you don’t have to. Sign up for the free Money Talks Newsletter — 10 seconds, no spam, just the stuff that matters.
4. Somebody still pays for the roads
The federal gas tax hasn’t been raised since the early 1990s, and it pays for highways, bridges and mass transit. (1)
The Congressional Budget Office estimates the gas tax brings in about $30 billion a year and the diesel tax about $11 billion. A five-month holiday would cut gross revenue by about $17 billion. (2)
There’s no such thing as a free tax cut. If the money doesn’t come from the pump, it comes from somewhere else — borrowing, other taxes or roads that wait longer for repairs.
5. Your car insurance bill is a bigger lever
Think about scale. Even a full-year holiday with every penny passed through would be worth $92 to a driver who buys 500 gallons and $184 to one who buys 1,000. (2) Now pull out your car insurance bill and compare. That’s a cost you can do something about this week, no act of Congress required.
Are you still paying renewal rates on your car insurance? If so, you are probably throwing away money.
See if you can get a better deal. One way to do it: Insurify lets you compare real-time quotes side-by-side without the spam.
It’s fast, secure, and rated 4.7 stars on Trustpilot.
It takes minutes to check, and it costs you nothing. See if you're overpaying — free, 5 minutes
6. Find the $625 somewhere else
If gas is costing you hundreds more this year, the fix is simple: find the money in the rest of your budget, where you’re in charge.
Forgotten streaming services, free trials that never ended, bills that creep up every year — recurring charges are the easiest money leak to miss. Rocket Money connects securely to your accounts and puts every subscription on one screen — cancel the ones you don’t want in a few taps.
It negotiates cable, internet, and phone bills and flags fee hikes before they hit. Members have saved over $880 million in canceled subscriptions to date.
Ten minutes could stop the leak for good. See every subscription now.
My honest take
I don’t blame anybody for wanting relief at the pump. Gas is up more than a dollar a gallon in a year, and that hurts — especially if you’re living on a fixed income.
But a gas tax holiday is a small check from someone else’s checkbook, and it isn’t even written yet. Even if it happens, you might see a dime or so a gallon, for a while.
So don’t wait on Washington. The money you control — your driving, your premiums, your monthly bills — is where the real savings are. Find $20 a month on your own, and you’ll have beaten any gas tax holiday Congress is likely to pass.
Sources: 1. Bloomberg (via Yahoo Finance); 2. Newsweek; 3. CNBC (via NBC San Diego)
Add a Comment