Save more, spend smarter, and make your money go further
If high gas prices have been stressing you out, you may have been relieved to see that the Biden administration is considering a gas tax holiday to drive down costs at the pump.
But what exactly is the gas tax, and would suspending it really have a significant impact on consumer fuel costs? We’ll answer those questions in the article below.
What is the Gas Tax?
Consumers have to pay both federal and state gas taxes. The revenue from these taxes is used to fund infrastructure projects and other government programs.
The federal gas tax currently costs 18.4 cents per gallon for gasoline and 24.4 cents per gallon for diesel. Each state determines how much the gas tax is, but the average is 31.02 cents per gallon for gasoline.
What is a Gas Tax Holiday?
With the high cost of gas, some lawmakers and consumers have asked that President Biden suspend the federal gas tax to reduce consumer costs. Five states have already suspended their state gas tax: Georgia, Connecticut, New York, Maryland and Florida. But drivers in these states still have to pay the federal gas tax.
Unfortunately, a federal gas tax holiday may have a negligible effect. Because the federal gas tax is relatively low, consumers may only notice a slight difference if the gas tax goes away temporarily. For example, if gas costs $5 a gallon and you have a car with a 15-gallon tank, you’ll only save $2.76 in total when you fill up. That’s not a meaningful difference.
Other experts say that fuel companies will not pass on gas tax savings directly to the consumer. Research from the University of Pennsylvania found that in Georgia, about 65% of the gas tax holiday was passed on to consumers, while 72% of the gas tax holiday was passed on to consumers in Maryland.
Some experts claim that only about 15% of the price of gas is due to taxes, while 60% is due to the cost of crude oil. Falling oil prices are key to reducing the cost per gallon, not eliminating the gas tax.
Other Ways to Save on Gas
Whether you live in a state that has a gas tax holiday or not, you can still find other ways to pay less at the pump.
Use a cash-back card
Many credit cards offer cash-back rewards when you fill up. Look through your current credit cards and see which has the highest cash-back percentage.
If you don’t have any cash-back credit cards, you can open one to reap the benefits. Choose a card that has the highest overall cash-back percentage for gas stations and other retailers. Ideally, you should also find a card with a large sign-up bonus, which will put some more money in your wallet.
Try to avoid getting a card with an annual fee, unless you’ll get other benefits from the card.
Clean out your car
The more baggage in the car, the more fuel you’ll burn. Take a day to clean out the car and remove anything that isn’t absolutely necessary. Focus on the heaviest items, like bike racks. You can always add those items back on when you need them.
Pay with cash
Some gas stations may offer a special discount if you pay with cash instead of a card. You might have to ask about these discounts in person, but you may wind up paying less than if you used a credit card with cash back.
If you do use cash to buy gas, make sure you’re not incurring extra ATM withdrawal fees, which could eat away at any savings.
Sign up for discounts
Some gas station chains offer discounts when you’re a member of their rewards program. It’s often free to join, but some may charge membership fees to qualify for the biggest discounts.
If there is a fee, you should do the math to see whether you would save money, break even or lose money. Consider how easy it is to frequent that particular chain or whether you’ll have to go out of your way just to fill up.
Warehouse clubs like Costco often have lower prices than other gas stations, so if you already shop there regularly, consider waiting to fill up until then.
Some grocery store chains will reward you with gas discounts when you spend a certain amount. Just make sure you don’t end up buying more groceries to pay less for gas.
Check gas prices
Gas prices can vary wildly from station to station. Before you fill up, use tools like GasBuddy.com to find the cheapest gas near you. Be sure not to travel too far out of your way to get gas, otherwise you’re just spending more money.
Deduct business travel expenses
If you’re self-employed, you may be able to deduct that mileage on your taxes. You can either deduct the miles driven or the money spent at the gas station. Make sure to take diligent records of how much you drive and spend.
If you’re traditionally employed, you generally can’t deduct miles on your taxes. In that case, you should ask that your employer reimburse you for these expenses. If they agree, start tracking your mileage and submit expense reports regularly. If there is a company vehicle, ask if you can drive that instead of your personal vehicle.
Plan errands around rush hour
The less time you can spend waiting in traffic, the less gas you’ll waste. Instead of running errands right after work, plan them for when there are fewer cars on the road. You should also try to group errands together – especially when they’re in the same part of town. You can use Google Maps to maximize your efficiency and plan the best route ahead of time.
Save more, spend smarter, and make your money go further
Zina Kumok is a freelance writer specializing in personal finance. A former reporter, she has covered murder trials, the Final Four and everything in between. She has been featured in Lifehacker, DailyWorth and Time. Read about how she paid off $28,000 worth of student loans in three years at Conscious Coins. More from Zina Kumok
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