States On Board for Gas Tax Holiday

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States On Board for Gas Tax Holiday

WASHINGTON -- Legislators from Florida, Missouri, New York, North Carolina and Indiana are answering the call of their constituents by pushing forth with various plans aimed at cutting gas taxes this summer, The New York Times reported.

"It's about trying to serve the people and trying to understand and have caring, compassionate hearts for what they're dealing with at the kitchen table," Governor Charlie Crist of Florida told Times. Crist, a Republican, proposed an initiative that would cut 10 cents from the state's gasoline tax for two weeks in July. "I'm supposed to respond to the people and try to make them happy."

Historically, gas holidays have done little to save consumers money as the decreased tax is often absorbed by rising gas prices. However, this has not stopped presidential hopefuls Sens. John McCain and Hillary Rodham Clinton, who are calling for a suspended federal gas tax from Memorial Day to Labor Day. Opponent Senator Barack Obama of Illinois has openly criticized the gas tax holiday as a gimmick, saying it is merely a Band-Aid that will not solve the problem and at best save consumers little money.

State gas taxes can run as high as 45.5 cents a gallon, which loads the price per gallon more than the federal excise tax at 18.4 cents. This requires federal and state lawmakers to work together, which with a tight timeline, is a tough task, the report stated.

"It clearly evokes a visceral response because we're the only industry that has our prices in two-foot-high letters on the street corner," John Felmy, chief economist at the American Petroleum Institute, told The New York Times. "We've seen other things go up in prices, like milk, but if you ask 10 people on the street what's the price of milk they may not know. All of them will know the price of gas."

Price fluctuations at bordering states have many consumers scratching their heads as they search for the best bargain. The Times reported that a visit to two gas stations in southern Alabama found at least half the cars were from Florida, where gas taxes are 13 cents higher. A similar scene was realized in Yuma, Ariz., where California drivers flocked for gas which is 70 cheaper per gallon.

Rebecca Laster, a mother of four from Campbellton, Fla., which borders Alabama, told the paper that she has been cutting corners to save gas including waiting around at her children's school opposed to making two trips to drop them off and pick them up.

"Gas takes up a majority of what I spend," Laster told the paper after putting $40 worth of gas in the tank of her minivan. In response to the political climate, she said: "I don't think they know what it's like to count every penny. They've never been in that position."

While Florida, Georgia, Illinois and Indiana have all enacted a gas holiday tax since 2000, retailers did not pass on all of the intended savings. According to a study by the American Road and Transportation Builders Association, when Illinois and Indiana suspended 7 cents of their state gas rates in 2000, the price at the pump fell by only 4 cents.

In other cases, such as in Florida in 2004, the tax holiday caused consumers to hoard gasoline which ultimately drove up prices at the pump. The New York Times reported the draft measures in Florida, Missouri and New York do not require retailers to pass on the tax suspension to consumers, nor are there provisions to prevent hoarding.

By contrast, the New York plan, sponsored by Republicans in the Senate, would suspend three state gas taxes, amounting to about 32 cents per gallon, from Memorial Day to Labor Day, the paper reported.

Missouri Republican Representative Jim Lembke called for a unique approach that would suspend the state's 17.6 tax rate, but drivers be required to turn in their receipts at the end of the summer when then state would cut them a rebate check.

As various plans are considered, consumers are not hopeful. "It's just politics," J. Vincent Schmidt, 23, of Panama City, Fla., told The New York Times. "If they take the taxes away on gas, they'll probably find someplace else to stick it in."