With gasoline prices at the pump rising like a SpaceX celebrity rocket launch, governors and state lawmakers around the country are looking for ways to ease the impact for their citizens. One idea being pushed is to call a holiday on state or even federal gasoline taxes.

These are the per-gallon taxes collected at the pump with every gasoline purchase. The money collected usually goes into the state or federal transportation fund to build or maintain roads and bridges.

Governors from several states, including Minnesota, are writing to congress members asking them to support a gas tax holiday for the remainder of 2022. What would that do to gasoline prices?

Assuming that the tax relief was applied directly to the pump price, the federal gasoline tax is 18.4 cents a gallon. Minnesota’s is 28.5 cents a gallon. If both were lifted, it would drop the price of gas 46.9 cents per gallon. According to GasBuddy.com, prices in New Ulm are right at $4.00 a gallon. Cutting 46.9 cents would put it right around $3.53 a gallon. That would certainly be some relief, but not exactly a return to the levels of a year or two ago.

What would happen to the state’s transportation funds if we had a fuel tax holiday? The state has already been seeing diminishing returns on the fuel tax as people drive less or drive more fuel-efficient or even electric vehicles. It has been looking at other ways to pay for transportation, including bonding for highway projects or, especially this year, using some of the massive state budget to fill in the fuel tax loss.

We think a fuel tax holiday would be beneficial for many families dealing with inflationary pressures. But we’d like to see how the state plans to keep the state’s transportation fund solvent in the meantime.