RICHMOND, Va. (WRIC) — Governor Glenn Youngkin wants to temporarily suspend the entire state portion of the gas tax to give Virginians relief at the pump but, in an interview on Wednesday, he acknowledged it won’t guarantee savings for consumers.
The emergency legislation seeks to eliminate Virginia’s 26-cent gas tax for 90 days and then phase it back in by the end of the summer.
If the gas tax holiday is approved by the General Assembly in a special session that begins on April 4th, it will take effect immediately, according to Youngkin.
Virginia’s Motor Vehicle Fuels Sales Tax is levied on distributors. Ideally, lower prices would be passed down to retailers and then to consumers, according to 8News Legal Analyst Russ Stone.
When asked if the legislation would guarantee savings to consumers, Youngkin said, “We can’t guarantee anything and, oh by the way, I think government intervention into private markets is why we’re in this trouble right now.”
Regardless, Youngkin thinks free-market competition will help drive prices down at the pump.
“We have an incredibly competitive industry in Virginia, and let’s just be clear, people aren’t making money with high crude oil prices right now. They get pinched through the whole system and that competition actually results in the lowest prices possible,” Youngkin said.
Several other states, both red and blue, are considering gas tax holidays. Some have already started implementation. Since a similar proposal took effect in Georgia, Gov. Brian Kemp has reported a drop in average gas prices.
Clifford Winston, a senior fellow of economic studies at the Brookings Institution, said consumers may see a small impact from the gas tax holiday, but not enough to justify possible market disruptions from government intervention.
“No, it’s not a good idea,” Winston said. “I think politically is really where you’re going to see the efficacy, right? I mean, from an economic point of view, this is just too small a ticket item really And importantly, this is not targeted to, you know, low income workers or less affluent households. ”
He said changes in individual behavior, like driving less, using public transportation or getting an electric vehicle, would result in much larger savings for Virginians.
“I don’t need the government to come in to intervene in the market. They’re not really helping anything. And as I said, they might hurt things by distorting the information that the market is trying to tell people,” Winston added ..
While Youngkin can’t promise savings for consumers, the gas tax suspension will undoubtedly come with a cost.
Youngkin argues that the Commonwealth Transportation Fund has over $ 1 billion in unanticipated revenue and that the state can afford to lose roughly $ 400 million without replacing that funding.
“Right now, we don’t need the money and we should pass it back to Virginians,” Youngkin said.
Virginians for High Speed Rail Executive Director Danny Plaugher disagrees.
“Our transportation system is going to get decimated. Virginia is the only state who is proposing a gas tax holiday that’s not also back filling transportation revenue. We’re also the only state that’s proposing it that’s also cutting another stream of transportation funding, and that’s the grocery tax, at the exact same time, ”Plaugher said.
Taken together, Plaugher projects various tax cut proposals being negotiated in the General Assembly could remove up to $ 2 billion in transportation revenue over the next six years, with rail and transit seeing a decline of nearly a quarter of a billion dollars.
Plaugher said this will hurt Virginia’s ability to repair roads, reduce highway traffic congestion, expand rail and more.
While the Commonwealth Transportation Fund has unexpectedly high revenue right now, Plaugher said inflation is simultaneously driving up the costs of these projects.
“The simple fact of the matter is that we’re not going to be flush with cash very soon as the inflationary economics start impacting our transportation system as well,” Plaugher said. is maybe canceling projects that could get done tomorrow and now they’re going to be done in three or four years and they’re going to cost twice as much. ”