Three-Month Federal Gas Tax Holiday: Estimated Cost Reductions to Households

Summary: We estimate that suspending the federal excise tax on gasoline from July to September this year would lower average gasoline spending per capita by between $4.79 and $14.31 over three months, depending on geographic location and modeling assumptions, and lower federal tax revenue by about $6 billion during that period.

Overview

President Biden has recently proposed suspending the federal gasoline tax for three months. We provide the following calculations for expediency that are discussed in detail in our March 11, 2022 analysis. We will soon release more analysis that includes a federal tax holiday applied to excise tax on diesel fuel.

Figure 1. Federal, State Taxes and Retail Gasoline Prices by State as of June 22, 2022

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Source: AAA Gas Price Website, American Petroleum Institute

Table 1: Change in Federal and State Tax Revenue, Gasoline Consumption and Expenditure

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Demand Elasticity	Change In Federal Tax Revenue (billion $)	Change In State Tax Revenue (billion $)	Average Consumption Change (gallon)	Average Expenditure Change ($)
-0.07	-6.028	0.024	0.206	-14.306
-0.40	-6.028	0.070	0.608	-4.789

Figure 2. Estimated Change in Gasoline Consumption and Expenditures per capita, by State

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Elasticity = 0.07
Elasticity = 0.4

Elasticity = 0.07

Elasticity = 0.4

Source: U.S. Energy Information Administration

This analysis was prepared by Zheli He and Xiaoyue Sun under the direction of Richard Prisinzano. Prepared for the website by Mariko Paulson.

  State,Price Less All Taxes,Federal Excise Tax,State Excise Tax,Other State Taxes & Fees
  CA,5.690166667,0.184,0.511,0.1705
  IL,5.135333333,0.184,0.392,0.204
  NV,5.155866667,0.184,0.23,0.2748
  AK,5.4407,0.184,0.0895,0.0618
  HI,5.074766667,0.184,0.16,0.3569
  WA,5.054333333,0.184,0.494,0
  OR,5.157366667,0.184,0.36,0.0283
  AZ,5.285,0.184,0.18,0.01
  DC,5.040333333,0.184,0.235,0.103
  MI,4.8533,0.184,0.2717,0.18
  IN,4.784433333,0.184,0.32,0.1779
  ID,4.889666667,0.184,0.32,0.01
  ME,4.913233333,0.184,0.3,0.0001
  UT,4.888233333,0.184,0.319,0.0001
  VT,4.871266667,0.184,0.121,0.2004
  RI,4.842333333,0.184,0.34,0.01
  NJ,4.679333333,0.184,0.105,0.402
  NY,4.8543,0.184,0,0.3217
  MA,4.9096,0.184,0.24,0.0254
  PA,4.577666667,0.184,0,0.587
  MD,4.801,0.184,0.271,0.09
  CT,5.023833333,0.184,0,0.1075
  NH,4.891366667,0.184,0.222,0.0163
  OH,4.742566667,0.184,0.385,0.0001
  DE,4.889666667,0.184,0.23,0
  MT,4.736833333,0.184,0.325,0.0075
  CO,4.833,0.184,0.22,0
  WI,4.707666667,0.184,0.309,0.02
  WV,4.653,0.184,0.205,0.152
  VA,4.659333333,0.184,0.262,0.082
  FL,4.514166667,0.184,0.04,0.3955
  WY,4.665333333,0.184,0.23,0.01
  NM,4.712533333,0.184,0.17,0.0188
  ND,4.660333333,0.184,0.23,0
  KY,4.618666667,0.184,0.246,0.014
  MN,4.535666667,0.184,0.285,0.021
  SD,4.522333333,0.184,0.28,0.02
  NE,4.555666667,0.184,0.248,0.009
  IA,4.493,0.184,0.3,0
  TX,4.584333333,0.184,0.2,0
  MO,4.577133333,0.184,0.195,0.0042
  NC,4.383833333,0.184,0.385,0.0025
  TN,4.478333333,0.184,0.26,0.014
  AL,4.423233333,0.184,0.28,0.0331
  KS,4.493366667,0.184,0.24,0.00025
  OK,4.528666667,0.184,0.19,0.01
  SC,4.4085,0.184,0.26,0.0075
  LA,4.460233333,0.184,0.2,0.0001
  GA,4.261833333,0.184,0.287,0.0885
  AR,4.388666667,0.184,0.245,0.003
  MS,4.430433333,0.184,0.18,0.0079  

  State	Elasticity	PerCapitaExpenditureChange	PerCapitaConsumptionChange
  AK	Elasticity=0.07	-12.1634903	0.158202685
  AL	Elasticity=0.07	-20.41921789	0.311661264
  AR	Elasticity=0.07	-16.99466235	0.264742408
  AZ	Elasticity=0.07	-13.33409512	0.177006611
  CA	Elasticity=0.07	-11.26688206	0.129142326
  CO	Elasticity=0.07	-12.81243625	0.18375806
  CT	Elasticity=0.07	-12.51653967	0.176874222
  DC	Elasticity=0.07	-5.279076917	0.071293816
  DE	Elasticity=0.07	-16.45306886	0.233012636
  FL	Elasticity=0.07	-13.57693727	0.198633706
  GA	Elasticity=0.07	-15.36455848	0.239315672
  HI	Elasticity=0.07	-9.104431292	0.118422296
  IA	Elasticity=0.07	-15.60340212	0.23545126
  ID	Elasticity=0.07	-14.75329108	0.205081221
  IL	Elasticity=0.07	-10.998713	0.139689916
  IN	Elasticity=0.07	-14.88542857	0.204550692
  KS	Elasticity=0.07	-15.39880769	0.235161233
  KY	Elasticity=0.07	-16.06255914	0.238287406
  LA	Elasticity=0.07	-15.33619374	0.237742327
  MA	Elasticity=0.07	-11.39511737	0.159717746
  MD	Elasticity=0.07	-12.62228797	0.177347503
  ME	Elasticity=0.07	-15.58499146	0.216896138
  MI	Elasticity=0.07	-14.40488291	0.197131421
  MN	Elasticity=0.07	-14.33061712	0.214155836
  MO	Elasticity=0.07	-16.99689368	0.257338529
  MS	Elasticity=0.07	-19.84406865	0.310307801
  MT	Elasticity=0.07	-16.60657846	0.237435312
  NC	Elasticity=0.07	-14.78222363	0.224033021
  ND	Elasticity=0.07	-18.3284016	0.271277306
  NE	Elasticity=0.07	-15.44172972	0.232096571
  NH	Elasticity=0.07	-16.13343727	0.228056829
  NJ	Elasticity=0.07	-12.13043289	0.169666099
  NM	Elasticity=0.07	-15.53393019	0.229420295
  NV	Elasticity=0.07	-12.17920599	0.156549549
  NY	Elasticity=0.07	-8.665153651	0.121431056
  OH	Elasticity=0.07	-13.45938683	0.190328842
  OK	Elasticity=0.07	-16.120198	0.246427858
  OR	Elasticity=0.07	-11.81607626	0.154924473
  PA	Elasticity=0.07	-11.64924081	0.16359442
  RI	Elasticity=0.07	-10.59832205	0.148071659
  SC	Elasticity=0.07	-17.60423532	0.272023881
  SD	Elasticity=0.07	-18.23729408	0.273587122
  TN	Elasticity=0.07	-16.2567425	0.247326391
  TX	Elasticity=0.07	-15.55175293	0.235080334
  UT	Elasticity=0.07	-12.53301016	0.174615467
  VA	Elasticity=0.07	-15.26279786	0.220992977
  VT	Elasticity=0.07	-14.18939688	0.198231148
  WA	Elasticity=0.07	-10.86771017	0.142423974
  WI	Elasticity=0.07	-14.41333336	0.207363757
  WV	Elasticity=0.07	-14.40704198	0.208335145
  WY	Elasticity=0.07	-19.36001596	0.285703438
  AK	Elasticity=0.4	-4.068974079	0.465567902
  AL	Elasticity=0.4	-6.838736134	0.917174577
  AR	Elasticity=0.4	-5.69272744	0.779099087
  AZ	Elasticity=0.4	-4.461192306	0.520905169
  CA	Elasticity=0.4	-3.766006919	0.380047418
  CO	Elasticity=0.4	-4.289042935	0.54077372
  CT	Elasticity=0.4	-4.189529856	0.520515567
  DC	Elasticity=0.4	-1.766434101	0.209807516
  DE	Elasticity=0.4	-5.507251824	0.685722901
  FL	Elasticity=0.4	-4.54564566	0.58455062
  GA	Elasticity=0.4	-5.146683358	0.704271836
  HI	Elasticity=0.4	-3.045647956	0.348499899
  IA	Elasticity=0.4	-5.225367966	0.692899424
  ID	Elasticity=0.4	-4.93762175	0.603524736
  IL	Elasticity=0.4	-3.678742804	0.411087466
  IN	Elasticity=0.4	-4.981433087	0.601963466
  KS	Elasticity=0.4	-5.1573393	0.692045914
  KY	Elasticity=0.4	-5.3784206	0.701245794
  LA	Elasticity=0.4	-5.136984894	0.699641706
  MA	Elasticity=0.4	-3.813939875	0.470026511
  MD	Elasticity=0.4	-4.224748019	0.521908366
  ME	Elasticity=0.4	-5.216018875	0.63829435
  MI	Elasticity=0.4	-4.820475602	0.580129609
  MN	Elasticity=0.4	-4.79876557	0.630230031
  MO	Elasticity=0.4	-5.69217918	0.757310528
  MS	Elasticity=0.4	-6.64740241	0.91319153
  MT	Elasticity=0.4	-5.559026986	0.698738203
  NC	Elasticity=0.4	-4.950535919	0.659297177
  ND	Elasticity=0.4	-6.137011335	0.798330356
  NE	Elasticity=0.4	-5.171066677	0.683027053
  NH	Elasticity=0.4	-5.400188429	0.671138667
  NJ	Elasticity=0.4	-4.059987226	0.499303092
  NM	Elasticity=0.4	-5.201234862	0.675151154
  NV	Elasticity=0.4	-4.073907794	0.460702957
  NY	Elasticity=0.4	-2.900218495	0.357354252
  OH	Elasticity=0.4	-4.505142006	0.560110592
  OK	Elasticity=0.4	-5.39898951	0.725201981
  OR	Elasticity=0.4	-3.952971952	0.455920591
  PA	Elasticity=0.4	-3.899049691	0.481435008
  RI	Elasticity=0.4	-3.547169644	0.435753739
  SC	Elasticity=0.4	-5.896531289	0.800527422
  SD	Elasticity=0.4	-6.107142456	0.805127815
  TN	Elasticity=0.4	-5.444514031	0.727846237
  TX	Elasticity=0.4	-5.208142496	0.69180784
  UT	Elasticity=0.4	-4.19460887	0.513868374
  VA	Elasticity=0.4	-5.109681057	0.65035076
  VT	Elasticity=0.4	-4.749070184	0.583365949
  WA	Elasticity=0.4	-3.635692286	0.419133409
  WI	Elasticity=0.4	-4.825065636	0.610241913
  WV	Elasticity=0.4	-4.823144474	0.613100571
  WY	Elasticity=0.4	-6.482286322	0.840784404