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'Does it solve the problem? Absolutely not': Realities of federal gas tax holiday for Hoosiers

Posted at 7:20 PM, Jun 22, 2022
and last updated 2022-06-22 19:26:05-04

INDIANAPOLIS — The average price of gas in the Indianapolis area Wednesday sits around $5.08, which is nearly 10 cents higher than the national average, according to Gas Buddy.

The Biden Administration is hoping relief is on the way after the president asked Congress to call for a federal gas tax holiday.

With the announcement from Biden, economists say the holiday would be a bad thing for the economy.

“It’s a bad idea," Dr. Michael Hicks said. "The fact of the matter is leadership and public environment is the same in private you need to tell people in order to get what we want, you’re going to have to endure a little sacrifice.”

Hicks is the Director of the Center for Business and Economic Research at Ball State University. He and other experts believe it is a short-term fix, to a long-term problem.

“This is what is seen as quick and easy, but it’s really a political not a policy remedy for inflation,” Hicks said.

Hicks believes a federal gas tax holiday would only prolong slow inflation.

“By cutting taxes, that just further stimulates the economy and while it’s welcome to those of us who have to buy a lot of gas to get to and from work, it’s just going to delay the end of inflation to weeks to months,” Hicks said.

Plus, it will save drivers much at the pump. Your Money Line CEO Peter Dunn did the math on what the average Hoosier could save if a federal gas tax holiday is enacted. Over three months, it is about $26 dollars.

“1,200 miles a month, 25 mpg, it’s going to be about $2 a trip to the gas pump difference,” Dunn said.

Starting July 1, Indiana state and excise gas taxes will hit a record 62 cents per gallon. The White House is pushing for states too to suspend their respective gas tax.

Dunn said if Indiana did this, Hoosiers could save around $86 dollars over the three-month hiatus.

“Does it solve the problem? Absolutely not,” Dunn said.

Both experts agree the problem is supply and demand adding to inflation.

“The real solution which no one wants to hear this is to stop getting gas is to make changes to your behavior,” Dunn said.

Whether a federal or state gas tax revenue pause, there is the possibility of worsening roads. The money is used towards improving infrastructure.

“Indiana raised its gasoline tax like four years ago in what I would call a very fiscally prudent measure because our roads are a national disaster in many places and we’re working to fix that, but we’re years away,” Hicks said.

WRTV asked Governor Eric Holcomb’s office if it is considering suspending the state gas tax. In response, a spokesperson forwarded an earlier statement outlining Holcomb’s plan to send $225 to Hoosier taxpayers in an effort to fight inflation.

RELATED | Holcomb calls special session July 6 to take action on $225 tax refund