No Holiday on These Taxes
When in doubt, in times of increased costs, some say we should pause collection of certain taxes. That happened on the federal level during COVID; you could opt to not have taxes withheld from your paycheck to give you more to live on. The catch, of course, was that those taxes would still be owed later. Many who chose to take the bird in the hand wound up being surprised when they had to pay a lot more than they were used to once that tax suspension ended.
So it is now with gasoline at the pump. Prices are the highest in history, so some are suggesting temporarily suspending or rolling back the federal and/or state taxes on gas. After all, it’s a consumption tax…if you use more gas, you pay more…if you use less gas, you pay less.
The problem is that while you personally may save money now, your car will feel the ill effects of it later. That’s because money from the gas tax in Iowa is targeted toward things like road repair. No money, no repairs.
Granted, it’s no small amount…the state motor fuel taxes are 30 cents a gallon on gas and ethanol, and 32.5 cents on diesel fuel.
The last time the gas tax went up was in 2015, by a dime a gallon. The promise at the time was the money would go to maintaining Iowa’s roads and bridges.
Iowa collected almost $675 million in fuel taxes in fiscal year 2021…up by $17 million from the year before. A gas tax holiday, then would reduce state revenue by nearly $2 million every day.
Leaders in Des Moines have not shown much interest for a gas tax holiday as being short-sighted and more of a stunt. Some Democrats think Iowa could do something, given the infrastructure money coming from the feds at some point. And some Democrat governors in various states have suggested a suspension of the 18.4 cent per gallon federal tax, because after all, it is an election year and economic issues typically prevail.
