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

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

But experts say the impact on consumers could be disappointing and the tax exemption could negatively impact public works projects.

On Wednesday, President Joe Biden urged corporations to push federal savings — 18.4 cents per gallon — directly on consumers, but UW-Madison professor and public finance expert Ross Milton said oil companies were not not required to do so.

“So if we reduce the tax on gasoline, the question is is that going to lower prices or is it just going to increase profits for the oil industry?” he said.

Even if the oil companies put consumers first and the state and federal governments suspended the gas tax, in Wisconsin that would only be about 51 cents saved per gallon, he said. JIt wouldn’t do much to offset the amount of gas that has increased over the last year or so, but instead could 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, executive director of the Wisconsin Transportation Builders Association, said the only way to keep these 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 available resources.

“If you remove these gasoline taxes, it will necessarily have a negative impact on the construction, safety and convenience of our system of roads and highways,” he said. “This not only impacts people’s daily lives, but also Wisconsin’s competitiveness.”

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