New York pauses gas tax as fuel prices hit record highs

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New York on Wednesday became the latest state to suspend its gas tax entering the travel-heavy summer months, as local and federal leaders scrambled anew to address record-high fuel prices across the country.

The announcement came as the average cost of unleaded gasoline nationwide exceeded $4.67 per gallon, according to AAA, which has warned about further spikes while global markets remain rattled by Russia’s invasion of Ukraine — and the sanctions applied in response.

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In New York, the decision halted the state’s roughly 16-cent-per-gallon levy through the end of the year, a move that Gov. Kathy Hochul (D) estimated would provide “$609 million in direct relief” to residents. The state’s gas tax holiday complements temporary caps that local counties recently placed on the sales taxes charged on gas and diesel purchases.

In suspending its fees, New York joined five other states in implementing such policies since the start of the year, according to the National Conference of State Legislatures. But the pauses are unlikely to save drivers more than a few dollars each time they fill up their tanks, since fuel taxes are not the main cause for high prices in the first place. Instead, it is the tumult in the oil market — and record-high economy-wide inflation — that continues to push up the costs of groceries, housing, travel and other goods and services.

In Washington, meanwhile, the Biden administration this week continued to grapple with the harsh reality that gasoline costs roughly $1.60 more per gallon today than it did at this same time last year. “We understand what the American people are going through,” White House press secretary Karine Jean-Pierre told reporters Wednesday. “We understand what inflation is doing to gas and food prices.”

For now, the average cost of gas appears poised to continue its climb, as countries are forced to choose between penalizing Russia for its invasion and safeguarding their economies from the harsh financial blowback. Earlier this week, for example, the European Union agreed to a plan to wean itself off most Russian oil deliveries, striking at the Kremlin in a move that is also likely to raise energy prices across the continent in the weeks to come.

The US government banned Russian oil imports in March, metering out a punishment that President Biden described at the time as costly to Americans yet necessary, even though Russian oil only made up about 3 percent of US fuel consumption. But the move, meant to force the Kremlin to the negotiation table, has produced little change in the conflict. In the meantime, the Biden administration has tried to tamp down the gas price spike by releasing millions of barrels of oil from the country’s strategic reserves.

Fearing an impact on summer travel, some states have taken matters into their own hands. Along with New York, three other states — Florida, Georgia and Connecticut — have implemented similar gas tax holidays. A fourth, Illinois, delayed a planned increase in its rate. And a fifth, Maryland, had instituted a pause in March, early in Russia’s war, but its 30-day pause expired last month even as oil prices continued to climb.

To some critics, the gas tax holidays have only “superficial appeal,” said Jared Walczak, the vice president for state projects at the Tax Foundation, noting the policies sap funds from key transportation-related programs. “It’s not well-targeted relief. The savings are a small fraction of the increase in gas prices.”

At least 18 other states are still discussing similar moves, according to NCSL. And governors from six states, including Michigan and Pennsylvania, have called for a pause in the roughly 18-cent-per-gallon federal gas tax: In a March letter, they described it as a key way to “reduce costs for Americans.”

Democrats unveil new push to punish oil and gas giants for high prices

A number of House and Senate Democrats have proposed such a pause, most recently Rep. Adam B. Schiff (D-Calif.), who on Tuesday announced a new bill that would replace the lost revenue with a new tax on oil giants’ profits.

“This is exploitation, plain and simple, and it’s unacceptable to all of the people who are having to spend hundreds of dollars more every month just to go about their daily lives, at a time when so many are already struggling to make ends meet, ” he said in a statement.

But the general idea has drawn seemingly unsurmountable skepticism from lawmakers in both parties. Republicans have lambasted a gas tax holiday as a political stunt, arguing instead for new regulations that open the door for more drilling. And some Democrats, including House Speaker Nancy Pelosi (Calif.), have raised concerns that oil giants may not pass on the savings to consumers — rendering such a new federal policy moot.

Pelosi and her fellow Democratic leaders instead have focused their energy on legislation that would penalize oil and gas giants for alleged price-gouging. The speaker secured passage of such a measure in May, aiming to empower the Federal Trade Commission to investigate price-setting practices and impose fines and other punishments for abuse.

But not a single Republican supported the House bill, foreshadowing its likely demise in the Senate, where Democrats require GOP votes to advance legislation in the narrowly divided chamber.

Other Democrats, led by Sen. Ron Wyden (D-Ore.), are set to unveil a proposal as soon as next week that would tax the industry’s windfall profits and limit its ability to buy back its stock. And still others are trying to scrounge together a broader package that might foster new, clean energy technology, which Biden endorsed in an op-ed in the Wall Street Journal this week, calling on lawmakers to revive a staple element of his economic agenda.

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