High Gas Prices Push States to Waive Taxes, Rules Ahead of Midterms

COLUMBUS, Ohio – As the war in Iran drives gasoline and diesel prices higher, state officials across the country are turning to gas tax holidays and other forms of relief. The moves come as affordability remains a major concern for voters heading into pivotal midterm elections.

Fuel costs were at the center of attention in Ohio on Wednesday, when lawmakers approved a 90-day state gas tax holiday with broad bipartisan backing. Ohio is one of at least 20% of states to adopt some type of fuel-tax relief, and many of those actions occurred within the past week, according to an Associated Press review.

States have taken different approaches. Some have suspended fuel taxes altogether, while others have enacted temporary reductions. Several have limited the assistance to farmers, loggers and other workers who use specialized diesel fuel.

The national average for regular gasoline reached $4.43 per gallon Wednesday, an increase of about 50% since the war with Iran began, according to AAA. Diesel averaged $6.41 per gallon, only a few cents below the record price set last week.

Here is a look at how states are responding to higher fuel prices:

Ohio governor’s race puts fuel taxes in the spotlight

Ohio Gov. Mike DeWine’s office said he intends to sign legislation suspending the state’s 38.5-cent-per-gallon gasoline tax and 47-cent-per-gallon diesel tax for the rest of the year. The state will use $725 million from its general fund to cover road and bridge work normally financed through fuel-tax revenue.

Republican legislative leaders rushed to bring lawmakers back to the Statehouse after Democratic gubernatorial candidate Amy Acton called for a gas tax holiday last week. Republican rival Vivek Ramaswamy unveiled a similar proposal several hours later. The two are competing in a close race to replace DeWine, a term-limited Republican. Democrats accused Ramaswamy of claiming credit for Acton’s idea, while his supporters argued that his plan included substantive details and Acton’s amounted to “tweets.”

Ramaswamy’s running mate, Rob McColley, serves as Ohio Senate president. On Wednesday, McColley invoked a technical procedure to end debate on the bill, saying Democrats appeared ready to engage in nothing more than “theatrics.” Senate Democratic Leader Nickie Antonio said one proposal would have demanded an end to the Iran war.

Republican state Sen. Michele Reynolds, a legislation co-sponsor, said the measure “will provide much-needed relief to Ohioans at a time when they are feeling the pressure of gas prices continuing to rise.”

In the House, Democratic state Rep. Allison Russo, who is running for secretary of state, called the measure an election-year “stunt.” She said it would save Ohio drivers an average of $55 over the next three months.

Several states have already suspended or lowered gas taxes

Georgia was the first state to suspend fuel taxes in March, after the war in the Middle East sent prices sharply higher. Republican Gov. Brian Kemp extended the break through June and later announced another 30-day motor fuel tax holiday, which began Tuesday.

Indiana Gov. Mike Braun, a Republican, has extended the state’s fuel-tax exemption several times since spring. The latest extension is scheduled to remain in place through Oct. 5.

Utah is applying a six-month, 6-cent-per-gallon fuel-tax reduction through the end of the year. Illinois and Kentucky have enacted smaller breaks by postponing tax increases that were scheduled to begin in July.

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Some states are easing rules governing diesel fuel

Over the past week, Republican governors in Alabama, Louisiana, Nebraska and Texas have introduced measures aimed at lowering fuel costs for the agricultural sector during harvest season.

The executive orders focus on dyed diesel, a tax-exempt fuel generally restricted to off-road equipment such as tractors, logging machinery and irrigation pumps. The orders temporarily suspend enforcement of those limits, allowing the cheaper diesel to be used in highway vehicles.

Governors said lowering transportation costs for crops could eventually help reduce grocery prices.

California ends restrictions on cheaper fuel blends

The Environmental Protection Agency allowed an annual switch to cheaper, winter-blended fuels beginning Sept. 1, a couple of weeks earlier than normal. The change could save up to 15 cents a gallon, according to data from the National Association of Convenience Stores.

But California sets its own stricter environmental fuel standards. In many parts of the state, summer-blended fuel is required through Oct. 31. Democratic Gov. Gavin Newsom ended the summer fuel requirement Monday, citing a recent state law that requires a reevaluation of regulations when retail gas prices rise substantially.

Fuel tax changes may have a delayed effect for consumers

State actions intended to provide relief from high fuel prices don’t always have the effect some consumers expect. That’s partly because fuel price volatility could cause costs to rise even as tax rates fall. But that’s also because taxes typically are charged at the wholesale level, not at the retail pump.

“Customers expect the day that a gas tax holiday takes effect that the price at every pump will be reduced by that amount. But it’s way more complicated than that,” said Jeff Lenard, a spokesperson for the National Association of Convenience Stores.

“The costs and the changes happen further upstream,” he said. “The retailer may also have product that has already been paid for with taxes that needs to be sold before you can acquire the new fuel that is not taxed and you can lower the price.”

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Lieb reported from Jefferson City, Missouri.