MORGANTOWN, W.Va. — A researcher at West Virginia University is arguing against the gas tax holidays being considered in several states as lawmakers look for ways to provide relief to consumers at a time of record-high gas prices and rising inflation.
Heather Stephens, associate professor of resource economics and management at the Davis College of Agriculture, Natural Resources and Design and a faculty research affiliate in the Regional Research Institute, has studied a range of effects of rising gasoline costs, especially on people with low incomes.
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“Although cutting taxes on gasoline may look like an easy solution with clear positive outcomes, the reality is different. Cutting taxes ultimately fails to deliver on broad social benefits and leads to other negative effects.”
“When gasoline prices rise, changes in demand lead to reductions in gasoline consumption. People purchase more fuel-efficient vehicles, begin carpooling and shift to public transit, which reduces overall dependence on fossil fuels. This reduced dependence thereby improves air quality and reduces the negative impacts of climate change.”
“Unfortunately, higher gasoline prices hit people in rural areas and others with long commutes or who lack access to public transit the hardest. Also, lower-income households face a greater burden from gas costs as a percentage of their income.”
“However, cutting gasoline taxes has unintended consequences. Households that already are equipped to shift away from private vehicle usage or purchase more fuel-efficient vehicles benefit disproportionately from the tax cuts, even as other less flexible households that still have to pay the higher base prices for gas benefit less. Additionally, cutting gasoline taxes means that the revenue provided by these taxes to support important investments like infrastructure is lost.”
“Better options include using portions of current gas tax revenues to provide alternative tax relief, especially to those hardest hit. This keeps the funding coming in for important investments like infrastructure and collects taxes from those who can afford them while also helping people make choices about commuting that factor in the higher gas prices that lead to environmental benefits.”
“Win-win solutions do exist. They just require a willingness on the part of policymakers to be creative.”
Stephens further addresses the topic as co-author of a blog post for Resources.
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