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The politics of a gas tax holiday, explained

Six DFLers in the Minnesota House have proposed legislation to stop collecting the state’s 28.5 cent per gallon tax from Memorial Day to Labor Day. Here’s why.

In Minnesota, imposing a gasoline tax holiday, especially over the summer vacation driving season, could cut per gallon prices by 47 cents.
Whether gas prices are a record depends on how comparisons are made and how inflation is accounted for, but it’s true that they’re higher than they have been in a decade and a half.
REUTERS/Bing Guan

Why might Democratic office holders be interested in temporary elimination of federal and state gasoline taxes?

An ad released this week by the National Republican Campaign Committee offers some explanation. Aimed at 10 incumbent Democratic U.S. House members who represent battleground districts, the spot attempts to tie the lawmakers to President Biden and rising prices“The blame for record-high gas prices lies solely at the feet of Joe Biden and House Democrats,” U.S. Rep. Tom Emmer, a Minnesota Republican and chair of the campaign committee, said in a statement announcing the ads. 

Among those targeted is U.S. Rep. Angie Craig, who represents Minnesota’s 2nd Congressional District.

Whether gas prices are a record depends on how comparisons are made and how inflation is accounted for, but it’s true that they’re higher than they have been in a decade and a half. The cost had already been rising when the Russian invasion of Ukraine put further pressure on prices.

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In Minnesota, imposing a gasoline tax holiday, especially over the summer vacation driving season, could cut per-gallon prices by 47 cents. Which is among the reasons why, two weeks ago, six Minnesota House DFLers proposed legislation to stop collecting the state’s 28.5 cent per gallon tax from Memorial Day to Labor Day.

The revenue — around $70 million a month that goes into the trust fund that pays for roads and bridges — would be backfilled with cash from the state’s $9.25 billion surplus.

Gov. Tim Walz, himself up for re-election this year, said he could support such a move and was one of six Democratic governors calling on Congress to halt collection of the 18.3 cent federal gas tax. “I think we understand the cost of doing that because people who say, ‘Just suspend every tax and we’d have a lot more money,’ but then we wouldn’t have any roads either,” Walz said. “But at this point of time, with inflationary pressures, Russian aggression and activities in Ukraine, I think it makes a lot of sense.”

Walz said it would be a way to reduce costs immediately on Minnesotans, something he has argued his proposed tax rebate checks would also do.

The proposal puts Republicans in an awkward place politically. Inflation will be an issue come fall, and it is easy to place the blame on the party in power. Anything that appears to lessen the impact of higher prices works against that talking point. At the same time, tax cuts have long been a staple of the GOP agenda, and appearing to oppose a tax cut wouldn’t be good politics either.

Gov. Tim Walz: “At this point of time, with inflationary pressures, Russian aggression and activities in Ukraine, I think it makes a lot of sense.”
MinnPost photo by Peter Callaghan
Gov. Tim Walz: “At this point of time, with inflationary pressures, Russian aggression and activities in Ukraine, I think it makes a lot of sense.”
In Minnesota, Republican leaders ridiculed the DFLers’ proposed tax holiday. And they signaled how they will use it in election races  — mostly by reminding voters that the DFL and Walz had supported gas tax increases up to 20 cents a gallon in 2019 yet now want to cut them temporarily. In an email to supporters, Sen. Michelle Benson, a Republican candidate for governor, termed it: “Another bogus political stunt by Tim Walz.” 

State Sen. Michelle Benson
State Sen. Michelle Benson
Yet Republican lawmakers in two other states — legislators in Michigan and the governor in Maryland — have endorsed temporary tax moratoria. Republicans in the Michigan Legislature passed the tax freeze while Democratic Gov. Gretchen Whitmer has suggested she may veto it.

Whitmer joined Walz in supporting bills in Congress to suspend the federal gas tax for the rest of 2022. “At a time when people are directly impacted by rising prices on everyday goods, a federal gas tax holiday is a tool in the toolbox to reduce costs for Americans, and we urge you to give every consideration to this proposed legislation,” read the letter from Walz, Whitmer, Wisconsin Gov. Tony Evers, Colorado Gov. Jared Polis, New Mexico Gov. Michelle Lujan Grisham and Pennsylvania Gov. Tom Wolf.

The DFLers who proposed the state gas tax holiday are all also in battleground legislative districts — in the Twin Cities suburbs, St. Cloud and the Iron Range — places where the holiday could help their re-election bids.

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But they face attacks from both their political left and political right. “This is just another election year gimmick from the Democrats,” said Senate Majority Leader Jeremy Miller, R-Winona, who said it is better to permanently cut income tax rates.

DFLers from more liberal districts, a group that includes the DFL Chair of the House Transportation Committee and the DFL lead of the Senate Transportation Committee, have also criticized the proposal.

Others in the DFL constituency think lowering gas prices encourages driving and thus increases greenhouse gasses. And there is a relationship between the cost of driving and use of transit, which fell during the pandemic and has still not recovered.