By Aman Jain. Originally published at ValueWalk.
Record inflation was already taking a toll on the budget of many Americans, but now rising gas prices is making it even harder for people to manage their budget. Several states are considering ways to mitigate the impact of rising gas prices on their residents. Many believe paying people directly, like the coronavirus stimulus checks, is one of the quickest and most efficient ways to at least reduce the impact of inflation. Gas stimulus checks, if approved, would likely be directed toward families with lower to moderate incomes.
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Gas Stimulus Checks: How Could It Help?
The ongoing war between Russia and Ukraine is sending gas prices up and will have an adverse impact on the average household, especially those with low- and moderate-incomes. A recent report by Moody’s Analytics estimated that inflation was costing $276 more per month for an average household. This cost is estimated to rise to $300 or more if gas prices continue to rise.
Similar to the coronavirus stimulus checks, the federal government could send gas stimulus checks to help Americans. More federal stimulus checks, however, seem unlikely for now, as the federal government has a few tools that it can use to help people. For instance, it could come up with a new program to support lower-income families, raise pressure on OPEC nations to increase petroleum production and resolve supply chain disruptions.
Though these measures could prove effective, they would take time to work. Families, on the other hand, need help now. Thus, the onus is on states to act quickly, and the fastest and most effective way is to provide gas stimulus checks.
To reduce the overall cost of such programs, these gas stimulus checks are likely to go to families with lower to moderate incomes, or those making less than 80% of the average national salary.
Other Ways To Provide Temporary Relief
Several states are considering giving indirect support as well so as to reduce the impact of rising gas prices. Maryland, for instance, announced plans to suspend gas tax payments for 30 days.
California is also considering similar plans to help its residents. The gas prices in California tend to be higher than in other states partly due to higher taxes for infrastructure and environmental fees. The state could either decrease the state tax on gas suppliers, or come up with some type of rebate to help defray the higher cost of gas.
California uses gas taxes to fund highway improvements and transit projects. Presently, this tax, which is paid by suppliers, is about 51 cents per gallon. This tax increases every year to keep up with inflation, and is set to rise again in July by about 3 cents per gallon.
In January, even before Russia invaded Ukraine, Gov. Gavin Newsom made a proposal to pause this increase in gas taxes for a year. This could provide some relief to consumers.
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