The gas tax holiday took effect Friday and is expected to cost the state $90 million in tax revenue. But the temporary reprieve impacts more than just the wallet.
“When Connecticut gets rid of the gas tax, that’s often seen as an implicit subsidy because there are real costs to people in Connecticut, from the emissions, from accidents, from congestion,” said Kenneth Gillingham, professor of economics at the Yale School of the Environment.
Drivers of internal-combustion cars will get 25 cents off a gallon until June 30, and those buying more will save more, Gillingham pointed out. Additionally, the lower price is expected to drive up demand, resulting in an outflow of dollars to benefit oil-rich Texas or Saudi Arabia.
“The people who are going to get the greatest benefit from a gas tax holiday would be people driving gas guzzlers,” said Gillingham, who is also a research associate at the National Bureau of Economic Research.
In the long term, Gillingham’s research has shown that the habits of motorists change when gas prices go up. Some drivers choose shorter trips or combine errands, while others opt for public transit – bus fares will be free from April 1 until June 30 – and some choose to buy electric vehicles.
“We’re seeing electric vehicle sales taking off in a way they haven’t before,” Gillingham said.
Sales of electric vehicles reached a record in the last quarter of 2021 at 4.5% of the total car market, according to the Kelley Blue Book. Gillingham says that may not seem like much, but it’s quadrupled from 2019.
The gas tax holiday is expected to cost the state money in tax revenue that has been historically directed toward infrastructure projects. But the true cost is far greater, research shows.
“Every time you burn a gallon of gasoline, there are additional costs that you don’t see,” Gillingham said. “There are various estimates, but usually you’re talking [about] adding $1 to $2 [if the price of gasoline factors in climate change and air pollution]. That’s a lot more than we’re taxing gasoline right now.”
