DALLAS — While motorists may welcome any effort to lower prices at the fuel pump, economists say suspending the state gas tax could impact funding for roads, highways and public education.
In response to Comptroller Glenn Hegar’s report on Thursday that he expects the roaring economy to add $13.7 billion to the state surplus, Lt. Gov. Dan Patrick announced that he supports suspending state gas taxes through the end of the year as part of a larger effort to return surplus money to taxpayers.
The state collects 20 cents per gallon on gasoline and diesel fuels. Data from the comptroller’s office recently showed that revenue from the state’s motor fuel taxes is on pace to meet pre-pandemic levels.
“That state gas tax is absolutely critical for funding state highways and local streets,” said Bernard Weinstein, an economist based in North Texas. He called the move a “terrible idea,” as the lion’s share of the state’s motor fuels tax revenue is used to build and maintain public roadways. State gas tax revenue is also used to support public education, according to the Texas comptroller’s website.
Additionally, Weinstein said it’s unclear how big of an impact the suspension of the gas tax could have for the average driver.
“You don’t know if the lifting of that tax will be fully reflected in the retail price because there are many factors that affect the retail price of gasoline,” he said.
President Joe Biden in June called on Congress to suspend the federal motor fuel tax, 18.4 cents per gallon for regular and 24.4 cents per gallon for diesel, amid historically high prices at the pump.
Ray Perryman, a Waco-based economist, described the impact of state fuel tax suspension on highway and public education funding is a “potential concern.”
“However, just the new revenue estimated from the Comptroller of Public Accounts over and above prior expectations is well in excess of the total collection of gasoline taxes. Thus, the state could easily offset the losses from surplus funds,” Perryman wrote in an email.
A suspension of the state gasoline tax “should have a modest downward effect” on fuel prices, and consumers would see a “substantial portion” of that impact, Perryman wrote.
He noted that gasoline prices are already declining “modestly” due to consumer reaction to high prices, increases in oil and gas production, refining capacity, and increases in imported refined products.
Regular gasoline cost about $4.51 per gallon in the first week of June, according to the U.S. Energy Information Administration. This week, the price of regular gasoline was about $4.18 per gallon, according to the agency’s website.
Patrick celebrated the “unprecedented windfall,” and said “any surplus should first go back to the taxpayers of Texas,” in a written statement Thursday.
In addition to a suspension of state gas taxes for the remainder of 2022, Patrick said he supports using $4 billion of the forecasted surplus for property tax relief as well as using funds for teacher raises, among other things.
“Every member of the Texas Senate will have ideas on how this additional revenue should be spent and I will give them full consideration,” Patrick said in the statement. “However, I believe, first and foremost, any surplus should first go back to the taxpayers of Texas. Texas homeowners must receive tax relief before we commit to any new spending.”
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