ORLANDO, Fla. — When Florida passed a one-month gas tax holiday in March, political leaders heralded the move as a relief for drivers facing inflation-fueled prices.
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Their promise was simple: the state would temporarily wipe away its 25-cent-per-gallon tax, meaning drivers would reap quarter after quarter at the pump that could be used to pay other bills. The move was supported by politicians in both parties.
Since the holiday took effect on October 1, data show Floridians have never saved 25 cents at the pump, and the benefits have been shrinking over time.
Analysts saw it coming
At the end of September – two days after Hurricane Ian tore through the Sunshine State – the average price of a gallon of regular fuel stood at approximately $3.36, according to gasoline tracker GasBuddy.
The effects of the holiday became apparent almost overnight. By the time most stations reloaded their tanks on October 4, the price crashed to $3.17, a 19-cent difference.
Meanwhile, neighboring Georgia’s prices, where a fuel tax holiday has been in effect since the spring and where prices typically fluctuate like Florida’s, also dropped, but by only one cent.
That placed the approximate benefits Florida drivers saw at 18 cents, while Competitor AAA’s data showed a similar, 17-cent difference.
It didn’t last.
The benefits of Florida's gas tax holiday have been shrinking. After an initial drop in prices, FL's have been creeping up much faster than neighboring GA's. The two states typically fluctuate more or less at the same rate.
— Nick Papantonis WFTV (@NPapantonisWFTV) October 14, 2022
M2M, the difference is appx. 8 cents. pic.twitter.com/PimKMdb3ZR
On Wednesday, October 5, OPEC announced a production cut of two million barrels of oil per day, sending prices soaring across the United States, including both in Georgia and Florida.
However, Florida’s prices rose much faster than its neighbor – to the point where the difference between the two states compared to their end-of-September prices was only 8 cents, saving consumers a third of what politicians campaigned on.
Back when the gas tax holiday was announced in March, analysts from multiple nonpartisan think tanks predicted the profits would go to the gas suppliers, rather than the buyers.
Video: What you need to know about Florida’s gas tax holiday
“Ultimately, the person selling you the gas gets to set the price,” Richard Auxier, Senior Policy Associate at the nonpartisan Tax Policy Center said. Citing the maximum reduction possible at the time, he continued: “There is no law or reason that the people selling the gas have to lower their prices by 27 cents.”
Other analysts took aim with the way Florida plans to pay for the deficit. The Florida Policy Institute’s Esteban Santis noted that the government still doesn’t know if it’s allowed to use American Rescue Plan funding passed in the wake of the COVID-19 pandemic. The case is winding its way through the court system.
“If it turns out that we can’t do this, that means we’ll have to surrender $200 million,” he said. “Instead of using federal dollars for something else, we effectively lose that money.”
Santis said Florida’s use of tax holidays to bring relief was the result of politicians looking for quick fixes instead of meaningful change.
Band-aid on a broken system
Sales tax holidays are popular tools throughout the United States. Typically lasting a few days, they’re designed to make a splash and encourage shoppers to head to the stores in search of savings, goosing a state’s economic activity.
For multiple reasons, analysts generally disdain them. They say, for the most part, they cause consumers to shift their spending habits instead of saving any actual money. It has also been noted that retailers, aware of the influx of customers, will offer “deals” that are worse than normal to boost their own profits.
But the Florida Policy Institute’s Esteban Santis says Florida’s holidays are more problematic because they’re partially caused by an unfair tax code that politicians appear to be reluctant to tackle.
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“This is still a temporary kind of band-aid solution,” he said. “It’s not targeted to the individuals who need the most tax relief. At the same time, there’s no real logic as to why we should discriminate between certain time periods and not the rest of the year.”
Santis often refers to Florida’s tax code as “upside down.” In a normal tax code, people who earn more pay more in taxes. Since Florida does not have an income tax and is heavily reliant on sales taxes for revenue, he said working-class earners spend a greater percentage of their money on taxes than the wealthy.
Since any politician who proposes an income tax is bound to be quickly voted out of office, Santis proposed doing away with sales tax holidays and replacing them with a rebate. The government would send taxpayers up to $500 each year to offset the sales tax, making the system fairer and the discount more effective.
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“There is an awareness that we need to reform our tax code,” he explained. “Now, it’s a matter of looking at better policy tools and implementing those as opposed to just another 14-day sales tax holiday.”
He followed up by admitting longer-term tax holidays, such as the year-long break on diapers Florida instituted this year, are more effective than their fleeting cousins.
Recognizing this, Gov. Ron DeSantis has been moving to expand certain holidays, including adding a second week on the back-to-school event and making baby items permanently tax-free to help young families, a move Santis supports.
But he still emphasized the need for leaders to take a few risks.
“I do think it’s time to think of new solutions,” he said.
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