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Orlando Sentinel
Orlando Sentinel
Business
Jeffrey Schweers

Oil suppliers got best of Florida’s gas-tax ‘holiday,’ experts say

TALLAHASSEE, Florida — Florida’s one-month gas tax holiday ended Monday without consumers ever seeing the full 25-cents-per-gallon break Gov. Ron DeSantis promised at the beginning of October.

The holiday did provide relief to the petroleum suppliers because they’re the ones who pay the tax to the state and then collect the money from the gas stations and convenience stores across Florida.

“It failed to meet its intended purpose if the goal was to provide relief to Florida taxpayers,” said Esteban Santis, an analyst at the Florida Policy Institute, a nonpartisan nonprofit organization that studies policy and budget decisions.

DeSantis originally recommended a five-month gas tax holiday, which would have cost $1 billion in lost tax revenue to the state. But his staff recommended making it a one-month gas tax holiday in October, financed by $200 million from the federal American Rescue Plan that DeSantis often criticizes as wasteful Washington spending. It was supposed to be used for COVID-19 relief.

The Bureau of Economic and Demographic Research projected that the tax holiday would cost the state $214 million, money that pays for Department of Transportation road projects. That translates into $214 million in tax relief for the oil industry.

Motorists benefited, too, because the price of gas went down some, but not the full amount.

After hitting $3.17 a gallon five days into the tax holiday, prices shot up in part after OPEC announced a 2 million barrel a day cut in production, to a high of $3.41 a gallon. They began to slowly decline again toward the end of the month, after President Biden announced he was tapping into the federal fuel reserves.

On Monday, the average price for regular gas in Florida was $3.29 a gallon, a dime less than before the tax holiday.

The petroleum industry donated $1.2 million to political campaigns and committees during the 2022 election cycle, and DeSantis got at least $449,000 of that money.

His biggest single contributor from the oil industry was Tom Corr, president and CEO of the George E. Warren Corp. of Vero Beach, one of the largest gasoline importers on the East Coast.

Democrats immediately blasted the tax holiday as a political stunt to boost the governor’s image a month before the election and said the money should have been used for other problems.

Democratic candidate Charlie Crist blasted the timing of the fuel tax holiday during last week’s lone gubernatorial debate, but DeSantis defended the tax as a much-needed relief against rising inflation he blamed on the Biden Administration.

“We have the fifth-lowest gas prices in the country right now because we did a gas tax holiday. We’re proud of that,” DeSantis said.

The law suspended four taxes that came out to 25.3 cents a gallon: the 1-cent municipal motor fuel tax, the 1-cent county motor fuel tax, the 8.3-cent state comprehensive enhanced transportation tax, and the 15-cent fuel sales tax.

Price reductions wouldn’t have been automatic because if a gas station had pre-holiday gas in their tanks on Oct. 1, they would not have to charge the reduced price until it got rid of the pre-holiday inventory, said Bethany Wester, communications director for the Department of Revenue.

Likewise, gas prices won’t automatically jump on Tuesday and won’t until the reduced price gas is sold out and stations receive their next, taxed shipments, she said.

Economic analysts have warned from the beginning that customers would not see much of a break at the pumps because too many other factors influence the price of gas.

“It was never certain that consumers would have felt the full impact at the pumps,” Santis said. The exact impact won’t be known until all the data comes in, he said. The Department of Revenue said it could take weeks or even months to get that data.

Even the Attorney General’s office acknowledged that customers wouldn’t necessarily see a price reduction because of all the other factors that affect the price of gas.

“Gas tax is a relatively small portion of what consumers pay at the pump,” said Ted Kury, an economist who studies energy policy at the University of Florida. “There isn’t a guarantee the tax savings get passed on to the consumers.”

Data from previous tax holidays show the oil industry benefiting disproportionately. A study by the Institute on Taxation and Economic Policy found that 30% of the savings during temporary tax holidays in Illinois and Indiana were pocketed by the oil industry and might be even higher in the current supply-constrained economy.

“But while the gas tax is undoubtedly a tax on drivers, this does not mean that every incremental change in the tax rate finds its way to drivers in a timely manner,” the Institute reported.

An analysis by the Penn Wharton Budget Model showed drivers saw between 58% to 87% of the savings during gas tax holidays in Maryland, Georgia and Connecticut earlier this year, but those prices were “often not sustained during the entire holiday,” the study concluded.

Also, tax holidays don’t pay for themselves, Santis said.

“The only way to pay for a tax holiday is to increase taxes down the line or cut services,” Santis said. “That’s why any tax holiday is not effective. They are kicking a problem down the road that we are going to have to deal with anyway.”

Florida taxpayers also may ultimately have to pay back that $200 million, since it came from the America Rescue Plan, he said.

“There is still ongoing litigation whether that’s allowed or not‚” Santis said. “And if it turns out it’s not allowed, that fuel tax holiday is going to have to come out of general revenue, which means Florida taxpayers will pay in the end.”

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