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What would suspending the federal gas tax mean for your wallet?

KNXV Gas Tax Pump Driving Road Generic
Posted at 5:04 PM, Jun 21, 2022
and last updated 2022-06-22 07:38:13-04

PHOENIX — You might be paying a little less at the pump in the next few weeks. Not because oil prices are coming down, but because there is talk on Capitol Hill of suspending the federal gas tax.

As of today, AAA estimates that the average gallon of regular gasoline in Arizona is a staggering $5.37, and about 30 cents higher in the Valley of the Sun, where most Arizonans live.

Americans pay two sets of taxes when filing up their gas tanks: state and federal. The federal gasoline tax comes to $0.18 per gallon, with diesel being higher at $0.24. Arizonans pay an additional $0.19 in state taxes, the seventh-lowest in the country.

If President Biden decides to suspend the gas tax it means an average savings of about $2.40 on an average tank size of 13 to 16 gallons. Filling up three times a month brings the savings to about $7. A suspension of the gas tax that lasted a full year would save Americans about $84 at the pump.

Taxes make up a small share of the cost of a gallon of gas. Data from the US Energy Information Agency estimates that in May taxes made up about 10-11% a gallon, a much smaller number than crude oil, which makes up almost 60%. Since taxes are a fixed cost, they have been making up an increasingly smaller amount in each gallon. On a 12-month moving average, taxes now make up a smaller share than refining.

Any savings at the pump has a near-term benefit to consumers. Five states, all in the east, have suspended their state gas taxes — Florida, Georgia, Connecticut, Maryland, and New York. With the exception of New York, those states are all experiencing gas prices lower than the national average of $4.96.