As gas prices spike, some Ohio lawmakers are floating the idea of suspending the state’s 38.5-cent-a-gallon tax.
But while Ohioans share in the nation’s affordability crises, most economists in a recent survey think a suspension wouldn’t provide meaningful relief. An even stronger consensus said the benefits of a suspension would not outweigh the costs.
Average gas prices have shot up 34% since President Donald Trump launched a war against Iran at the end of February. Iran retaliated by choking off the Strait of Hormuz, through which 20% of the world’s oil and gas transits. Passage remains restricted as Trump fluctuates between saying a deal with Iran is imminent and threatening another all-out attack.
While some Ohio lawmakers are floating a three-month tax suspension, economists are skeptical that it would do much for Ohio motorists.
Scioto Analysis asked a panel of 19 economists if they agreed that, “A three-month gas tax suspension would provide meaningful financial relief to Ohio residents.”
Eleven disagreed, six said it would, and two were uncertain.
Bob Gitter of Ohio Wesleyan University said that the savings wouldn’t amount to much for the average motorist.
“If you buy a tank of gas every week you would save $6,” he wrote in the comment section of the survey. “Over a three month period that would be about $80. Low-income people could use a break but $80 would not, in my view, by meaningful financial relief.”
Kevin Egan of the University of Toledo said they wouldn’t even save that much.
“Consumers would not see a 38.5-cent reduction in gasoline prices; probably more like half that,” he wrote. “Saving 16 cents a gallon for a vehicle that averages 30 mpg and is driven 16,000 miles a year… so 4,000 miles in 3 months would save (4000/30)*.16=$21.33. $21 is not ‘meaningful.’”
However, Bill LaFayette of Regionomics argued that for low-income drivers, every little bit helps.
“A suspension of the gas tax would amount to something like a 10.5% price cut — less if gas prices continue to rise,” he wrote. “But that could be meaningful to lower-income households and those who have to drive far.”
Revenue from the state gas tax largely goes to infrastructure projects. The economists said there is a cost to pausing that revenue.
They were asked whether they agreed that, “The long-term economic benefits of a three-month gas tax suspension would outweigh the long-term economic costs of reduced state infrastructure funding.”
Fifteen disagreed and three were uncertain. Only one agreed.
Most who disagreed gave reasons similar to that of David Brasington of the University of Cincinnati.
“Gas tax holidays usually end up causing deferred maintenance, which makes roads more expensive to repair than if normal maintenance had been done,” he wrote. “It’s like skipping a few dentist visits: it will save you some money upfront, but the resulting cavities will be more expensive to repair.”
Jonathan Andreas said gas taxes are already too low to cover “externalities” created by gasoline consumption.
By that, he was referring to environmental costs and other harms inflicted on society as a whole that energy providers don’t pay for.
“There is an enormous consensus about the negative externalities of gas consumption among economists on both the left and the right (except those few who are funded by the fossil-fuel industry),” he wrote.
“Even (Harvard economist) Greg Mankiw thinks taxes on gas are inefficiently low which lead to distortions in the economy. This would make those distortions worse.”
