Pennsylvania’s families and economy are currently dealing with rising prices that are the result of the supply chain issues created by an unexpectedly quick economic recovery and the rise in gas prices created by Russia’s war on Ukraine. As we have shown, the state will have an accumulated surplus of $10.2 billion at the end of the current fiscal year. It’s time to use that money to deal with the current difficulties Pennsylvanians are facing—including the rise in gas prices—which in turn threaten to slow our economic recovery.
Republicans in Harrisburg have recently called for cutting Pennsylvania’s gas tax to soften the blow of higher gas prices. But a temporary cut in the gas tax is the wrong policy for four reasons.
First, when gas taxes go down, wealthy oil companies don’t reduce prices at the pump at the same rate, if at all. Instead, oil companies take their time reducing prices—or do so less than would be justified by the reduction in taxes. That’s even more likely to be true in Pennsylvania where our gas tax is a wholesale, not retail, tax than in other states where the gas tax is a consumer tax.
Second, cutting gas taxes would give an unnecessary handout to oil companies, which are already making windfall profits. This is especially unfair in Pennsylvania because our deeply flawed corporate tax system allows wealthy, multinational companies to escape paying corporate net income taxes. Giving oil companies a break by lowering gas taxes adds insult to the injury of not taxing their extraordinary profits. A gas tax holiday is a Republican plan to bail out the same wealthy corporations they already protect from paying their fair share of corporate tax to the state.
Third, reducing gas taxes would subsidize the wealthy corporations that use substantial amounts of gas such as large trucking companies, delivery companies like FedEx, and online retailers like Amazon that rely on them. Instead, the state should be directing relief from high gas prices to regular Pennsylvanians.
Fourth, any reduction in gas taxes threatens ongoing efforts to fix our roads and bridges. This is bad for Pennsylvania workers engaged in that work. And it’s bad for consumers as well. Even if the gas tax leads to a small reduction in gas prices, it won’t help Pennsylvania families if the pothole tax goes up and they must pay more to their mechanics for the damage done by our dilapidated roads and bridges.
Rather than cut gas taxes, we propose that the state send the owners of registered cars and light trucks a $250 check per vehicle to offset the temporary increase in the cost of gas. We include light trucks because we recognize that many families and small businesses, especially in rural areas, rely on trucks rather than cars. Our estimate is that after excluding fleet vehicles—which make up roughly 15% of the cars and light trucks registered in Pennsylvania—this program would cost the state about $1.8 billion.
We also recommend that the General Assembly adopt three elements of the Brighter PA plan to spend ARP funds put forward by Governor Wolf and House and Senate Democrats to help families deal with rising prices.
These three key elements are:
- $200 million for the Property Tax Rebate program, which would give a one-time bonus to low-income renters and homeowners. This program would give an estimated 466,000 Pennsylvanians an average additional rebate of $475.
- $500 million for the PA Opportunity program to provide grants that average about $700 for a family of four to 3 million low- and moderate-income Pennsylvania families.
- $225 million for the COVID-19 Relief Statewide Small Business Assistance Program which will provide grants ranging from $5,000 to $50,000 to 11,000 small businesses that have been hurt by the pandemic.
The total for these three programs and the gasoline rebate program is $3.2 billion. It should be paid for with ARP funds, including the uncommitted and those that were unnecessarily added in June to the General Fund, which, at the end of this fiscal year, will have a surplus of more than $4.7 billion.
Pennsylvania’s ARP funds can help our state’s families and economy weather the stresses created by our fast recovery from the pandemic and the Russian war on Ukraine. It’s time for the General Assembly to act.