Electronic tax

New York Weighs Gas Tax Holiday, Popular ‘Bad Idea’

ALBANY, NY — In the feverish final days of state budget negotiations, there is little New York state lawmakers seem to agree on. One of them is that gas prices are too high.

Proposals to give New Yorkers some sort of relief have gained momentum in recent days, even as other issues show little movement. The only question, it seems, is how to do it.

The Democratic-led Senate has proposed suspending some state gasoline taxes at the pump from May through December. A similar proposal in the Assembly would reduce all taxes for an entire year.

Others have suggested issuing one-time rebate checks, which could target low- and middle-income New Yorkers, or creating a tax credit.

And while everyone wants to share the heat of a welfare tax cut, it would have tax consequences that could come at the expense of other state priorities, including roads, bridges and transportation. in common.

“Most economists think that’s a bad idea,” said Jason Furman, professor of economics at Harvard University, adding that the debate was less about whether a tax exemption was harmful than about its harmfulness.

“Do you know one terrible thing you should never do?” He continued. “Or is it a minor bad thing, and why not just go ahead and do it because it’s good policy?”

New York isn’t the only state considering offering relief from soaring fuel prices following the Russian invasion of Ukraine. Connecticut, Maryland, Florida and Georgia have enacted gasoline tax holidays, while officials in California, Ohio and West Virginia have considered relief measures.

Supporters hope suspending all or part of the state’s gas tax would offer tangible relief to struggling New York drivers, who pay an average of $4.33 a gallon, according to the AAA. They argue that high gas prices have the potential to cripple the state’s fragile economic recovery.

“We’re asking people to get things back online: start going back to businesses, going to restaurants, and that’s really putting a damper on things,” said MP Angelo Santabarbara, sponsor of the proposal, adding that he saw this as Covid relief. measure.

Governor Kathy Hochul, a Democrat from Buffalo, did not include a gas tax suspension in her executive budget plan, but indicated last week that she would be open to including it in the budget, which must be submitted on April 1.

“It’s about people getting to work and getting the kids dropped off at school and just trying to live their day to day lives,” she said last week, adding “Budget timing is perfect for solving this problem.”

A Siena poll released on Monday showed that 70% of voters across all parties favored some kind of tax relief. Democrats, especially those in Upstate and Long Island, where Republicans have made significant inroads, have taken notice ahead of this year’s election.

State Sen. James Gaughran, a moderate Long Island Democrat whose voters mostly drive cars, said he was “open to whatever is the best way.”

“I think it’s important that people get relief now, as soon as possible,” he said. “If it can’t be done at the pump, then reimbursement checks should come in as quickly as possible to try to help people offset some of these rising costs.”

New York State takes about 33.35 cents for every gallon of gasoline sold, much of which goes to fund roads, bridges, trains, subways and buses. The gas tax suspension seems less popular among lawmakers in New York, where many rely on public transit.

And economists argue that a gas tax exemption could run counter to some of New York’s other goals.

Because people tend to use more gasoline the more money they make, economists say wealthier New Yorkers would benefit more from the tax exemption than poorer ones. And cutting gasoline taxes, even temporarily, could encourage New Yorkers to drive more, hampering the state’s environmental progress.

Proponents of rebate checks or a tax credit say their approach could be more narrowly targeted to those who need it most and prevent gas companies from raising prices to offset fuel tax savings. gasoline. Opponents say a flat-rate discount could unfairly benefit those who drive little.

Lawmakers also would have to decide how to get by without the money generated by the tax — more than $2.2 billion in combined state and local revenue each year. The majority of this sum is spent on public transit projects such as roads, bridges and mass transit, with a significant portion going to the city’s transit agency.

The Metropolitan Transportation Authority — which operates the city’s subway and buses, Long Island Rail Road and Metro-North Railroad — is set to receive 3.3% of its gas tax funding this year.

The authority said every dollar was needed to help it avoid service cuts or fare hikes as authorities try to bring passengers back after the pandemic. Janno Lieber, the authority’s chairman and chief executive, initially expressed dismay at the loss of gas tax revenue, but has since indicated that the state will make up for any lost revenue. .

Ultimately, experts say, the hardest thing about implementing such a plan might be ending it, especially if prices remain high.

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

Michael Gold and Luis Ferré-Sadurni contributed report.