Growing calls to suspend or eliminate federal and state gas taxes have consequences

Growing calls to suspend or eliminate.

Key points

• While diesel has surged by $2.67 per gallon (+72.2%), nationwide, regular gasoline has rose by $1.25 per gallon (+39.7%).
• Mississippi Joint Task Force Vigilance to employ $2.5 million from Justice Department to fight fraud.
• The federal gas tax remains at 18.4 cents per gallon, or CPG, the same as it has been since 1993.
• Respected agricultural and forestry organizations, including the Mississippi Farm Bureau, the Mississippi Loggers Association, and some 20 other groups, have joined in pleas to state authorities seeking relief.
• A Far Out stay in Starkville: The motel with a Johnny Cash past.

Growing calls to suspend or eliminate federal and state gas taxes have consequences. By: Sid Salter – October 7, 2026.

Federal and state fuel taxes are flat taxes. The current spike in gas rates doesn't bring in more tax revenue for the state or the federal administration.

Previously year, voices as disparate as President Trump and members of both houses of Congress, along with Mississippi elected authorities, have called on suspending either federal or state taxes on gasoline and diesel fuel in response to soaring rates for both commodities.

Over the past year, fuel rates have surged throughout both regular gasoline and diesel, driven largely by global energy disruptions and ongoing geopolitical conflicts, including the war in Iran and the conflict between Russia and Ukraine. While diesel has surged by $2.67 per gallon (+72.2%), nationwide, regular gasoline has rose by $1.25 per gallon (+39.7%). In Mississippi, drivers face an even sharper percentage-based hike at the pump since of lower baseline costs from the prior year, according to the American Automobile Assn. (AAA).

On July 1 in Mississippi, new laws took effect, cutting the sales tax on groceries and raising the state tax on gasoline. The higher gas tax, to be phased in over three years, will ultimately growth the state tax to 27 cents per gallon.

Mississippi's 2025 legislation raised the state's motor fuels tax to 21 cents per gallon beginning last year and rose to 24 cents on July 1 of this year before peaking at 27 cents per gallon on July 1, 2027. The federal gas tax remains at 18.4 cents per gallon, or CPG, the same as it has been since 1993.

Notably, the federal excise tax on highway diesel fuel is 24.3 cents per gallon, plus an extra 0.1-cent-per-gallon Leaking Underground Storage Tank (LUST) fee, for a total federal tax of 24.4 cents per gallon.

For context, a number of politicians called on Mississippi Gov. Tate Reeves to take immediate action to ease the financial strain from rising gasoline and diesel costs, including declaring an economic emergency, temporarily suspending the state fuel tax on gas and diesel, and providing provisions to allow farmers and loggers to employ off-road fuel to expand the available supply.

Energy experts say the real benefit of suspending federal and state fuel taxes is greatly overstated, and that while it makes consumers feel better, the actual savings are less than projected. According to The University of Pennsylvania, a federal fuel tax suspension like that proposed by the White House would diminish the federal Highway Trust Fund by at least $11.5 billion.

As the non-partisan tax policy experts wrote in August, the Tax Foundation takes the long view on the wisdom of suspending fuel taxes.

"These holiday gimmicks, like those for state sales taxes, are inefficient at providing relief to consumers. While only minimally lowering drivers' tax bills." Georgia Tech economist Robert Harris was blunter, they exacerbate funding problems for roadways, even though road user fees already struggle to cover their costs.

As an energy economist, I have seen that suspending those taxes does reduce rates, but not as much as politicians-or drivers-might hope. Research on past gas tax holidays has discovered that consumers receive concerning 79% of the reduction in gas taxes. That means oil firms and fuel retailers keep concerning one-fifth of the tax cut for themselves rather than passing those savings to the public.

Suspending the federal gas tax. It would require Congress to pass a law, wouldn't support consumers much. Even if oil firms passed on all the savings to consumers, the national average for gas and diesel would drop by only concerning 4%. The reduction in high-cost states such as California would be even smaller.

"Gas taxes are just one factor that drives gas rates. Overall, the cost of a retail gallon of gas is the sum of four components: the cost of crude oil, refining, distribution and marketing, and taxes." Concerning the Author(s).

Sid Salter is a syndicated columnist. He is Vice President for Strategic Communications at Mississippi State University. Sid is a member of the Mississippi Press Association's Hall of Fame. His syndicated columns have been published in Mississippi and a number of national newspapers since 1978. Opinion Sid Salter September 16, 2026.

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Taken together, the developments around growing calls to suspend or eliminate federal and state gas taxes have point to a situation that is still moving, and the coming days should bring more clarity.