As the price of gas keeps climbing and climbing, hitting a national average of $3.49 per gallon, lawmakers look to policy to lower that price. Some lawmakers have proposed a halt on the gas tax until 2023 to give some relief to consumers who rely on gas in their everyday life. The gas tax is a levy imposed on the overall price per gallon of gas. While states have their own tax, the Federal Government has a 18.4 cent tax per gallon that some lawmakers have proposed putting on hiatus, in a newly proposed bill.
This would be the first change in the gas tax since 1993, and is being proposed to combat a 7.5% rise in the cost of living experienced in 2021. The bill itself would put the tax on hold, as well as authorize the allocation of other general funds to keep funding the Highway Trust Fund, previously funded by the federal and state gas taxes.
The bill is meeting some criticism however, with critics calling the bill "ineffective," and "short sighted". The main issue critics have with the bill is that they think the effect the pause has on gas prices won't be as large as lawmakers think it will be. Saying that gas retailers "might" pass along some of the relief, but the majority would ultimately feed into inflation. Critics are worried this bill might make inflation worse as the revenue of the gas tax for 2022 is estimated to be around $20 Billion, something that the Government would miss out on if they halt the tax.
https://www.marketwatch.com/story/would-a-federal-gas-tax-holiday-mean-lower-prices-at-the-pump-dont-bet-on-it-critics-say-11644951388
I think it is really interesting that the price of gas has reached such a high price that the government is considering removing the tax on gas entirely, something that I did not think the government would be willing to entertain let alone do. Has the government ever considered removing taxes from goods or services before and what does this say about the future of gas prices and where they are going?
ReplyDeleteIt will be interesting to see what will happen to the price, demand and supply of gas if the tax is gone. According to economist Adam Smith, the market will get a new equilibrium because of the invisible hand. The market price will probably decrease, but is the decrease enough for the lawmakers?
ReplyDeleteI think it would be smart for the government to lower or remove the gas tax entirely, it will help many consumers due to a drop in price plus, many Americans will be thankful that such an inelastic good will not be as much of a burden as it was. The government though can lose a lot of money by cutting the tax at the same time too.
ReplyDeleteIt is really interesting that the federal government is considering getting rid of the gas tax, but I wonder how much it will really help the economy. Since the tax does bring in a significant amount of revenue for the federal government, I wonder where else the government would be able to get that amount of money to finance their Highway Trust Fund. I think that the tax may help consumers a little bit, but I don't know if getting rid of the tax will really help the economy as much as some people think or hope it might.
ReplyDeleteGas prices are a common way for the average daily consumer to gauge the health of the economy and how it affects their lives. How do the see the situation in Ukraine and Russia playing into the gripes of the Americans gas buyer in the coming weeks?
ReplyDeleteThis will definitely help the consumers but then the demand for gas is likely to go up and may result in a shortage of supply of gas.
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