New York wants to eliminate gas tax to make fuel cheaper

The debate over the New York state budget was heated up. Legislators seem to agree on only a few aspects. For example, that gasoline prices are too high, - reports New York Times.

Statements that it is necessary to somehow make life easier for New Yorkers have been heard more and more often in recent days. The only catch is how to do it.

The Democratic-led Senate has moved a proposal to suspend state fuel taxes at gas stations from May to December. Others have proposed issuing one-time rebate checks targeted at low- and middle-income New Yorkers. And while everyone wants to share in the joy of tax cuts, there is a risk of disappointing financial consequences in other areas important to the state.

“Most economists think this is a bad idea,” said Jason Fuhrman, professor of economics at Harvard University. The discussion was not so much about whether tax holidays are harmful, but about how much damage they can cause. "What is it? Something scary that you should never do? he continued. “Or is it something that can hurt only slightly?”

New York is hardly the only state considering providing assistance due to the sharp increase in fuel prices after the Russian invasion of Ukraine. Connecticut, Maryland, Florida and Georgia have introduced temporary gas tax holidays, while officials in California, Ohio and West Virginia have considered mitigation measures.

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Suspension of some or all of the state's gasoline tax would be a significant relief to struggling drivers in New York. They pay an average of $4,33 for 3,79 liters, according to AAA. High fuel prices could potentially undermine the state's fragile economic recovery. “We are asking people to return everything online: doing business, ordering in restaurants, this will help level the situation,” Assembly member Angelo Santabarbara addressed the people. And he added that he considers this a measure to combat Covid.

Gov. Kathy Hochul, a Democrat from Buffalo, did not include a gas tax suspension in her executive budget plan. But last week, she indicated that she would agree to include it in the budget, which is due to be approved on April 1. “It’s about people getting to their jobs, taking their kids to school, and just trying to get on with their daily lives,” she said last week, adding: “The timing of the budget is perfect for dealing with this problem.”

An opinion poll in Siena released on Monday showed that 70 percent of voters along party lines were in favor of some kind of tax break. State Sen. James Gokhran, a moderate Long Island Democrat whose voters mostly drive cars, said he was "open to whatever path is best." “It is important that people get help as soon as possible,” he said. "If that's not possible at the gas station, then discount checks should arrive as quickly as possible to help people offset some of the rising costs."

New York State charges about 33,35 cents for every gallon of gasoline sold. Most of the money goes to finance roads, bridges, trains, subways and buses. The suspension of the fuel tax is less popular among New York lawmakers who rely on public transportation.

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Economists argue that the gas tax holiday could also run counter to some of New York's other goals. As a general rule, people use more fuel the more money they earn. Therefore, economists believe that wealthy New Yorkers will benefit more from the tax holiday than the poor. And cutting taxes on gasoline, even temporarily, could encourage New Yorkers to drive more, undermining the state's environmental progress.

Proponents of the tax break say their approach could be more narrowly focused on those most in need. And prevent fuel companies from raising prices to offset savings on gasoline taxes. Opponents say the flat discount could unfairly benefit those who drive less.

Legislators will also need to decide how to do without tax money. That's over $2,2 billion in combined state and local revenue each year. Most of these funds usually go to transit projects for roads, bridges and public transport. The rest of the money goes to the city transport department.

The Metropolitan Transportation Authority, which owns the city's subways and buses, the Long Island Railroad, and the Metro North Railroad, expected to get 3,3 percent of its funding from gasoline taxes this year.

The authorities said every dollar is needed to avoid service cuts or tariff increases. As officials try to lure passengers back after the pandemic. Janno Lieber, chairman and chief executive officer of the body, initially expressed dismay at the loss of gas tax revenue. But later he said that the state would compensate for any lost income.

The hardest part of pursuing such a plan may be to end it, experts say, especially if prices remain high.

“The real danger is that it's a permanent tax cut,” said Mr. Furman, an economist. “Who wants to be the person to raise gas taxes?”