Governors Forgo Past Response To High Gasoline Prices

Governors from both parties are offering the same response to soaring gasoline prices: Don’t look at me.

As war in the Middle East continues to destroy vital energy infrastructure and batter the global oil market, very few states are seriously considering a gasoline tax holiday — their only real short-term lever to lower prices at the pump.

Governors appear less inclined to drain state coffers than they were in 2022, when Russia’s invasion of Ukraine prompted gas tax holidays in five states and calls for them in more than a dozen others.

The hesitance comes even as the energy market has emerged as one of the biggest pressure points in the war. President Donald Trump on Monday backed away from his threat to bomb Iranian power plants, citing confidential negotiations with Iranian leadership. Iran’s parliament speaker responded by accusing Trump of trying to “manipulate the financial and oil markets.”

As of Wednesday, negotiations between Washington and Tehran appeared far from a resolution, even as the energy industry struggles to keep pace with the fast-moving and constantly shifting conflict.

Meanwhile, with few oil tankers making their way through the Strait of Hormuz and both sides bombing oil and natural gas hubs, national gasoline prices have risen about 33 percent over the past month and could spike even higher.

But state budgets are stretched thinner than they were in 2022. And state leaders sound a little more jaded.

“When we did it in the past … I don’t think the consumer really felt relief,” Republican Gov. Ron DeSantis said last week about the idea of repeating Florida’s 2022 gas tax holiday.

When gas tops $4 a gallon, he said, drivers don’t notice a few cents off — if state action yields even that. “Sometimes the prices get raised so the consumer doesn’t see any difference,” DeSantis said.

Democratic Gov. Kathy Hochul offered a similar viewpoint when confronted with the idea of suspending New York’s gas tax.

"I don't think people felt it,” she said this month. “Do you know what happened? The prices went even higher.”

It makes sense that governors have cooled toward gas tax holidays, say economists and state budget experts. They didn’t have much of an impact on curbing fuel prices last time nor did elected officials get much credit for trying.

Nowadays, state finances also are under more strain — including major new costs shifted onto them by President Donald Trump’s megabill — compared to the Biden era, when state budgets were awash with new federal dollars for pandemic aid.

But Alexander Arnon, director of policy analysis at the Penn Wharton Budget Model, said he’s been surprised at how many governors have ruled it out.

“Possibly that is because they learned some lessons in 2022,” he said. “If you are a state government, there is not a lot you can do in today’s environment.”

'I don't want to overpromise'

A gas tax holiday this time could have even less effect than 2022’s underwhelming impacts, experts said.

This shock threatens to become much larger than Russia’s invasion of Ukraine, which unleashed Western sanctions and reshuffled trade routes. But those price spikes were mostly driven by fear of what could happen, Arnon said, whereas this year supplies already have suffered real damage that can’t be easily reversed.

In June 2022, average U.S. gas prices peaked above $5 per gallon. On Sunday, average U.S. prices hovered around $4 — but that reflects supplies that were already on hand or in transit when the war started, Arnon said.

“It’s fair to say we’ve never really seen anything like what is happening now,” he said. The war makes market predictions highly uncertain, he added, but “it does not look like the supply shock is being fully reflected in prices yet.”

A gas tax holiday can be effective during a transitory price surge when producers can expect supplies to stabilize relatively quickly, Arnon said.

But nobody can predict how the war will unfold. And in the meantime, states will be watching from the sidelines.

“Tinkering with gas taxes won’t reopen the Strait of Hormuz, and it won’t deliver anything close to dollar-for-dollar savings to motorists,” Jared Walczak, a senior fellow at the Tax Foundation, wrote last week. 

That’s because today’s costs reflect a “true supply bottleneck,” with gasoline producers and retailers bracing for even higher prices if the Iran war continues, Walczak said in an interview. Higher prices reflect a kind of rationing, he added, so any gas tax relief would just allow demand to recover — pushing prices right back up.

Policymakers "wouldn’t be getting much juice for their squeeze,” he said. “They would be losing all of that revenue for transportation trust funds and budgets. But only a fraction of savings flows through to consumers.”

Further blunting the political appeal of a gas tax: Most states levy the tax upstream from gas stations, so any impact would be hard for drivers to recognize.

“It’s not like the state can directly take 30 cents a gallon off at the pump — that’s not the way it works,” said Carl Davis, the research director at the Institute on Taxation and Economic Policy.

The public realizes the war, not state policy, is why gas is more expensive, he added. Meanwhile, states are grappling with major new health care, food assistance and other expenses that the Republicans’ 2025 megabill pushed onto their books.

“That’s not really leaving state lawmakers in the mood to want to step in and clean up yet another mess that’s coming down to the state level from federal policy,” Davis said.

Or as Josh Shapiro, the Pennsylvania governor and potential Democratic presidential candidate, put it: “It's a problem of Donald Trump's making.”

"He's got to quickly figure out a way to address it,” Shapiro added. “There's a pattern here where he creates chaos, he increases prices, and he creates a lot of problems for people in Pennsylvania. And we're now dealing with the next problem that he's created, and that is soaring gas prices."

Michigan Gov. Gretchen Whitmer, another potential Democratic presidential contender, pointed to the mismatch between the global market forces roiled by Trump’s war and the small impact of gas taxes.

“One state can’t address all the pressures that we’re feeling because of this war in Iran,” she said last week. “I don’t want to overpromise to people on something we can’t deliver.”

‘Call Donald Trump’

That hasn’t stopped some states from trying.

Connecticut Gov. Ned Lamont, a Democrat running for a third term this year, is pushing lawmakers to pause the gas tax. And Republican Gov. Brian Kemp was noncommittal about a gas tax holiday — until last week, when the Georgia Legislature voted overwhelmingly to insert one into annual tax legislation.

Those states remain the outliers, though.

As the Trump administration contends oil prices will fall quickly after the war ends, few Republicans have come out to argue otherwise.

“Once you secure the supply coming through the Strait of Hormuz, you’re going to see it go down, ideally, as much as it went up,” Indiana Gov. Mike Braun said this month.

Instead of states shouldering the costs, some governors have said the federal government should be the first to pause gas taxes. The federal gas tax is about 18 cents.

‘The very president who promised that prices would come down on day one is presiding over this and allowing this to happen,” Hochul said last week at a gas station near Buffalo. "We need them to give us relief and help us out here.”

But the Trump administration has ruled out, for now, seeking a federal gas tax holiday.

Republicans on Capitol Hill don’t seem eager for one either. Oklahoma Sen. James Lankford said lawmakers haven't been discussing one. And Senate Majority Leader John Thune of South Dakota was skeptical it would make much difference.

“I don’t know that the federal gas tax is going to lower [gas prices] by a lot,” Thune said. “But I think ultimately it’s getting the strait opened up. I think that’ll get gas prices down.”

Just as state budgets are under strain, the federal Highway Trust Fund is already in a deficit.

“As somebody who works with this pretty intimately, I just don’t think the effects of [a suspension] would be strong enough to merit that,” said Sen. Shelley Moore Capito of West Virginia, who chairs of the Senate Environment and Public Works Committee and serves as the fourth-highest ranking Republican in the chamber. “Plus the implementation, I think, would be an issue.”

Democrats, meanwhile, have shown little interest in giving the Trump administration cover.

Although some Democratic state lawmakers in Pennsylvania, Florida and elsewhere have floated gas tax holidays, party leaders see the issue as cutting against Republicans. And political strategists of both parties say high gas prices could become a major GOP problem for the midterms.

Maryland Gov. Wes Moore forcefully rejected a call by state Republicans to pause the gas tax, as his Republican predecessor Larry Hogan did in 2022.

“If Maryland Republicans are serious about lowering costs, they should pick up the phone and call Donald Trump and tell him to end this missionless war — instead of asking Maryland taxpayers to help pay for it,” Moore spokesperson Ammar Moussa said in a statement. “The best way to bring prices down is to address the source of the pain, not shift the cost of Donald Trump’s war onto Maryland families.”

Marie J. French, Pavan Acharya, Kylie Williams and Carlos Anchondo contributed to this report.