When Florida passed a month-long gasoline tax holiday in March, political leaders heralded the move as relief for drivers facing inflation-fueled prices.
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Their promise was simple: the state would temporarily remove its 25-cent-per-gallon tax, meaning drivers would collect quarter after quarter at the pumps, which could be used to pay other bills. This decision was supported by politicians from both parties.
Since the vacation went into effect Oct. 1, data shows Floridians have never saved 25 cents at the pump, and the benefits have diminished over time.
Analysts saw it coming
In late September — two days after Hurricane Ian swept through the Sunshine State — the average price for a gallon of regular fuel was around $3.36, according to gasoline tracker GasBuddy.
The effects of the holidays became apparent almost overnight. By the time most stations had refilled their tanks on Oct. 4, the price had crashed to $3.17, a difference of 19 cents.
Meanwhile, prices in neighboring Georgia, where a fuel tax exemption has been in effect since the spring and prices generally fluctuate like those in Florida, also fell, but by just a cent.
That put Florida’s approximate driver benefits at 18 cents, while competitor AAA’s data showed a similar difference of 17 cents.
It didn’t last.
On Wednesday, October 5, OPEC announced a production cut of two million barrels of oil per day, sending prices skyrocketing across the United States, including both Georgia and Florida.
However, prices in Florida rose much faster than in its neighbor — so much so that the difference between the two states from their end-September prices was just 8 cents, saving consumers a third of what politicians campaigned.
Around the time the gas tax exemption was announced in March, analysts at several nonpartisan think tanks predicted that profits would go to gas suppliers rather than buyers.
Video: What you need to know about Florida’s Gasoline Tax Exemption
“At the end of the day, it’s the person selling you the gas who sets the price,” said Richard Auxier, senior policy associate at the nonpartisan Center for Fiscal Policy. Citing the maximum reduction possible at the time, he continued: “There is no law or reason for gasoline sellers to reduce their prices by 27 cents.”
Other analysts have taken aim at how Florida plans to pay the deficit. Esteban Santis of the Florida Policy Institute noted that the government still does not know if it is allowed to use funding from the US bailout enacted in the wake of the COVID-19 pandemic. The case is making its way through the court system.
“If it turns out we can’t do that, that means we have to give back $200 million,” he said. “Instead of using the federal dollars for something else, we are effectively losing that money.”
Santis said Florida’s use of tax exemptions to provide relief was the result of politicians looking for quick fixes instead of meaningful change.
Band-aid on a broken system
Sales tax exemptions are popular tools in the United States. Typically lasting a few days, they are designed to create a stir and encourage shoppers to visit stores in search of savings, disrupting a state’s economic activity.
For multiple reasons, analysts generally despise them. They say that, for the most part, they encourage consumers to change their spending habits instead of saving real money. It has also been noted that retailers, aware of the influx of customers, will offer worse than normal “deals” to boost their own profits.
But Esteban Santis of the Florida Policy Institute says Florida vacations are more problematic because they’re partly caused by an unfair tax code that politicians seem reluctant to address.
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“It’s still kind of a temporary band-aid solution,” he said. “It’s not targeted at the people who need tax relief the most. At the same time, there is no real logic as to why we should distinguish between certain periods and not the rest of the year.
Santis often calls Florida’s tax code “upside down.” In a normal tax code, people who earn more pay more taxes. Since Florida has no income tax and relies heavily on sales taxes for income, he said working-class earners spend a higher percentage of their money on taxes than the wealthy.
Since any politician who proposes an income tax is bound to be quickly removed from office, Santis proposed to remove the sales tax exemptions and replace 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 rebate more efficient.
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“There is a realization that we need to reform our tax code,” he explained. “Now it’s about looking at better policy tools and implementing them rather than just a 14-day sales tax holiday.”
He went on to admit that longer-term tax holidays, such as Florida’s one-year diaper break instituted this year, are more effective than their short-lived cousins.
Recognizing this, Governor Ron DeSantis moved to expand some holidays, including adding a second week to the back-to-school event and making baby items permanently tax-free to help young families, a move he Santis supports.
But he still insisted on the need for leaders to take some risks.
“I think it’s time to think about new solutions,” he said.
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