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Lawmakers pitch gas tax holiday in Minnesota

A group of House Democrats seek to remove the state's 28-cent fuel tax during the summer months to make gas more affordable.

MINNEAPOLIS — Gas prices were already trending upward before Russia invaded Ukraine this week, fueling speculations of shock waves throughout the economy. 

It's with that in mind a group of House Democrats have proposed to suspend the state's gas tax through the summer months.

"One thing we can do is a gas tax holiday. Suspend the gas tax from Memorial Day to Labor Day, when gas prices are typically at their highest," Rep. Zack Stephenson of Coon Rapids told KARE.

"That will provide real relief to working families, help them balance those family budgets as we’re seeing gas prices rise even higher due to the war that’s going on in Ukraine."

Currently, motorists pay 28.5 cents in state taxes plus 18.4 cents in federal taxes on each gallon of gasoline they pump. The money is dedicated solely to roads and bridges and is considered a user fee because the people who use the roads pay for the upkeep via the fuel tax.

"Right now, with gas being $3.50, that 28-and-a-half cents is a good chunk of that. That’s something people will notice and feel at the pump, let alone if gas goes up as I expect north of $4.00 or $4.50 this summer."

Rep. Stephenson said the gas tax holiday would cost MNDOT roughly $200 million in lost revenue, which he proposes replacing with an equal amount from the General Fund.  

Such a change would require approval by the legislature and Gov. Walz, and often there's resistance at the capitol to using general tax dollars for transportation. But Stephenson asserts the state's projected $7.7 billion budget surplus makes it affordable in this special circumstance.

"I'm still very concerned about our roads and bridges, but we have the money in our state coffers. What we don't have is relief for working people in Minnesota whose budgets are stressed."

The one example of General Fund money going to transportation is the sales tax on auto parts. Currently, 50% of those proceeds go to roads and bridges.  A Republican bill going through the legislature this year would devote 100% of the auto parts sales tax revenues to transportation.

The other Democrats who've joined Stephenson in the push for a summertime gas tax holiday are Rep. Kaela Berg of Burnsville, Rep. Jessica Hanson of Savage, Rep. Dave Lislegard of Aurora and Rep. Dan Wolgamott of St. Cloud.

State Capitol Republicans were critical of the idea. Senate Majority Leader Jeremy Miller issued the following statement on Friday:

"This is just another election year gimmick from the Democrats. The best way to provide relief to Minnesotans is with permanent tax cuts that result in more money in people’s pockets every single paycheck, week after week, month after month, year after year."

The Senate GOP has proposed using $3.5 billion of the surplus to cut the lowers income tax rate from 5.35% to 2.8%. That tax cut would be permanent and ongoing.

Republicans also want to exempt all Social Security income from state taxes, which would use $539 million of the current surplus, and also be ongoing year after year.

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