Gas tax savings may not benefit consumers much, could negatively impact public works

MADISON, Wis. – For months, leaders at the state and federal levels have been considering suspending the gas tax as consumers grapple with soaring prices at the pump.

But according to experts, the impact on consumers may be underwhelming and the tax holiday could negatively impact public works projects.

On Wednesday, President Joe Biden urged companies to push federal savings — 18.4 cents per gallon — directly on to consumers, but UW-Madison professor and expert in public finance Ross Milton said oil companies are under no obligation to do so.

“So if we cut the gas tax, the question is it going to lower prices or is it just going to increase profits of the oil industry?” he said.

Even if oil companies were to put consumers first and both the state and federal governments suspended gas tax, in Wisconsin that would only amount to roughly 51 cents saved per gallon, he said. That would do little to compensate for the amount gas has increased over the last year or so but could instead come at a cost to public works projects.

In Wisconsin, the transportation system is largely funded by gas taxes, and without those funds, some construction projects could be delayed or stopped altogether.

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Steve Baas, the executive director of the Wisconsin Transportation Builders Association, said the only way to keep those projects on track would be to find alternative funding, but the loss of revenue would be especially difficult to manage because the state is already operating with a gap between construction needs and resources available.

“If you take those gas taxes off the table, it will necessarily have a negative impact on the construction, safety and convenience of our system of roads and highways,” he said. “That impacts not only people’s daily lives but Wisconsin’s competitiveness.”

According to Milton, to replace lost revenue, that likely means borrowing money at the federal level and increasing the budget deficit, but at the state level, that could lead to higher income, property or sales taxes.