Texas Gas-Tax Holiday Debate Amid Rising Fuel Prices

As the war in Iran rages on and gas prices continue to climb, some Texas politicians are calling for a temporary pause on fuel taxes—a move they say would give drivers immediate relief but critics argue would drain money from roads, schools, and transportation projects.

The idea, known as a gas-tax holiday, has gained new attention as several states have already moved to suspend or reduce fuel taxes this year. In Texas, the debate has split along questions of cost, authority, and whether pausing the tax would actually translate into meaningful savings at the pump.

What is a gas-tax holiday?

A gas-tax holiday is a temporary pause, cut, or waiver of taxes charged on motor fuel.

At the federal level, the gas tax is 18.4 cents per gallon on gasoline and 24.4 cents per gallon on diesel, according to the Federal Highway Administration. That money is one of the main revenue sources for the federal Highway Trust Fund, which helps pay for highway and transportation programs. A federal gas-tax holiday would require action by Congress; the Bipartisan Policy Center notes the federal government has never suspended the tax before.

Texas also has its own fuel tax. The state charges 20 cents per gallon on gasoline and diesel, a rate that has not changed since 1991. In Texas, 15 cents of that tax goes toward the state highway system, while 5 cents goes to public education. A state gas-tax holiday in Texas would be separate from any federal holiday.

But a gas-tax holiday may not lower pump prices by the full amount of the tax. Fuel taxes are often collected from suppliers or distributors before the fuel reaches the station, and researchers have found that some savings may be kept by suppliers or retailers instead of fully passed on to drivers. The Bipartisan Policy Center estimated that suspending the federal gas tax would likely lower pump prices by about 10 to 16 cents per gallon, not the full 18.4 cents.

Which Texas politicians support a gas-tax holiday?

Several Texas politicians on both sides of the aisle have called for some kind of gas-tax pause, though they are not all calling for the same thing.

James Talarico, an Austin Democratic state representative running for U.S. Senate, has called for suspending the federal gas and diesel taxes until average fuel prices fall back to where they were before the war in Iran. His campaign has argued the move would save drivers about $200 a year and long-haul truckers about $4,000 a year.

At an Austin gas station, Talarico framed the proposal as a cost-of-living measure, saying, "Americans in the last election voted for two things: To end the forever wars and to make life more affordable. But the people in power have done the exact opposite. Texans need relief. Americans need relief."

Gina Hinojosa, an Austin Democratic state representative running for governor, is pushing Gov. Greg Abbott to suspend the Texas gas tax. Her campaign said she held a press conference after Talarico’s federal proposal and called on Abbott to use emergency powers to pause the state tax.

"Washington needs to act to bring down gas prices, but right now, Greg Abbott has the power to make gas 20 cents cheaper for every Texan driving to work," Hinojosa said.

Sid Miller, Texas’ Republican agriculture commissioner, has also called for a state gas-tax suspension. In a May 4 statement, Miller urged Abbott to suspend the state motor-fuels tax as prices climbed. Miller argued Texas should follow other states that have already moved to pause or reduce gas taxes.

Miller has also supported a federal gas-tax pause, calling on President Donald Trump and federal officials to temporarily suspend the federal tax.

"Texas families are getting hammered at the pump, and enough is enough," Miller said. "Record-high gas prices are crushing working Texans, farmers and ranchers with every school drop-off, every tractor filled, and every grocery run. It’s time for immediate relief."

The push has drawn resistance from Abbott’s side. Abbott campaign spokesperson Eduardo Leal told Axios the governor does not have authority to suspend the state tax, adding that the money is "constitutionally dedicated to fund roads and public schools."

U.S. Sen. John Cornyn, meanwhile, has criticized Talarico’s federal proposal. Cornyn told Fox 4 News that suspending the federal gas and diesel tax would "explode the deficit," saying it is "not really a solution" and that it would "make things worse."

What other states have already enacted gas-tax holidays?

At least four states have already enacted some kind of state-level fuel-tax holiday or reduction.

Georgia suspended its motor-fuel excise tax from March 20 through May 19 after Gov. Brian Kemp signed House Bill 1199. The Georgia Department of Revenue said the suspension applied to fuels subject to the state motor-fuel excise tax, including gasoline, clear diesel, aviation gasoline, propane, gasohol, ethanol, liquefied natural gas and compressed natural gas. Local sales and use taxes were not included.

Indiana first suspended its gasoline use tax for 30 days beginning April 8. The state Department of Revenue said the suspension applied only to the gasoline use tax, not the federal gas tax or Indiana’s separate excise tax. On May 6, Gov. Mike Braun extended the holiday and expanded it to include Indiana’s gasoline excise tax, which reportedly would bring the combined savings to 59 cents per gallon.

Utah approved a smaller, delayed reduction. Gov. Spencer Cox’s office said Utah’s gas tax would be reduced by 15% beginning July 1, with the six-month cut trimming about 6 cents from the state’s roughly 38-cent-per-gallon fuel tax.

Kentucky Gov. Andy Beshear moved this week to cut the state’s gas tax by 10 cents per gallon and delay a scheduled increase, framing the rising prices as emergency relief. The reduction is expected to apply to both gasoline and diesel and take effect May 11, pending approval from Kentucky Attorney General Russell Coleman, who has said he will sign off on the order.

There is also recent precedent from the last major spike in gas prices. In 2022, Connecticut, Florida, Georgia, Maryland and New York suspended their gas taxes for at least part of the year, while Illinois delayed an inflation adjustment rather than fully suspending the tax, according to the National Conference of State Legislatures and the Tax Policy Center.