The COVID-19 pandemic and the Russia-Ukraine conflict triggered significant supply disruptions and skyrocketing gas prices. By the first half of 2022, the average price of gasoline had risen by over 50%. In response to these escalating prices, several U.S. state governors, alongside the federal government, contemplated temporary suspensions of the gas tax to mitigate the impact of these high prices. A distinctive feature of gas prices is that the price at the pump includes both federal and state-level gas taxes. Any changes in the tax rate are immediately apparent to consumers.
The most recent issue of The Takeaway, “The Effect of Gas Tax Holidays on Inflation Expectations and Consumption” reports on how much gas tax reductions are passed through to consumers and on findings that states with pronounced pass-through rates saw more significant declines in inflation expectations and consumption.
The article was written by Yoon Joo Jo, an assistant professor in the Department of Economics and a Mosbacher Research Fellow at Texas A&M University. The Takeaway is a publication of the Mosbacher Institute for Trade, Economics, and Public Policy at the Bush School of Government & Public Service at Texas A&M University.
