U.S. States Extend Gas Tax Waivers Amid Rising Fuel Costs Due to Iran Conflict

As several states across the United States waive fuel taxes and extend moratoria, both households and the broader economy face mounting costs triggered by the conflict in Iran. AAA reports the national average price for regular unleaded gas is currently $4.41 per gallon, while diesel stands at $6.39. This is a stark increase from the previous year’s figures of $3.16 and $3.71, respectively. The Watson Institute of International and Public Affairs reveals that American households have incurred over $122 billion in extra fuel costs since the war began in late February.

In light of these challenges and the anticipated impact on the 2026 midterm elections, various states have decided to reduce or pause their gas taxes. Indiana Governor Mike Braun, a Republican, announced on Wednesday an extension of the waiver on the state’s gas sales and excise taxes for an additional month. Initially declared in April as an “energy emergency,” the waiver has been extended repeatedly. The current version, originally set to expire on October 5, will now last through November 4. Braun’s decision also includes easing regulations on dyed diesel to support the agricultural and timber industries. “The added cost of fuel prices caused by continued disruptions to the global oil supply can make a major difference in our farmers’ success and their ability to put food on the table for their families,” he stated on X.

Newsweek has reached out to the governor’s office for comments.

States Suspending Gas Taxes

In Indiana, the gas price averages $3.81, up from $3.07 last year but is still below the state’s record of $5.24. Braun first suspended the 7 percent gas sales tax in April, followed by the 36-cent-per-gallon excise tax in May, providing drivers with an approximate 61 cents reduction per gallon.

By October 1, approximately one-third of U.S. states pursued some form of tax relief in response to the Iran conflict and related fuel price hikes. These measures range from exemptions for specific sectors to comprehensive sales and excise tax breaks. Georgia led the way, implementing a suspension following the onset of the war on February 28, a move extended by Republican Governor Brian Kemp through October 29. “Global markets remain unstable and are subjecting Georgians to unpredictable price shocks on basic goods and services, including but not limited to gasoline and diesel fuel prices,” Kemp noted in his order signed on Monday.

Ohio lawmakers approved a 90-day pause on gas and diesel sales taxes this week, garnering broad bipartisan support. Republican Governor Mike DeWine signaled plans to sign the bill despite previous warnings that such measures could jeopardize funding for the state’s department of transportation, according to FOX19.

Recent days have seen governors in Alabama, Louisiana, and Texas sign or advocate for targeted fuel tax relief for farmers, who are currently burdened with increased diesel costs during the critical crop-harvesting season.

Budget Concerns About Future Tax Breaks

Despite these measures, many officials remain cautious. New York’s Democratic Governor Kathy Hochul expressed skepticism in March, stating that the state’s previous gas tax suspension in 2022 had minimal effect on drivers. “I don’t think even people felt it because you know what happened? The price just went even higher,” she commented at a Politico forum. Hochul has advocated for the federal government to suspend its 18.4-cent-per-gallon excise tax on gas, assigning most of the blame for rising costs to the Donald Trump administration.

In May, the president declared intentions to suspend the federal gas tax “until it’s appropriate.” Nevertheless, this pledge has not been acted upon, and bipartisan pursuits in Congress have yet to advance.

South Carolina Governor Henry McMaster, speaking in mid-September, opposed suspending the state’s 28-cent-per-gallon gas tax, arguing that any immediate relief would eventually lead to significant problems. “That’s where most of the state money comes from to build roads. So, if we reduce that tax, we’ll be cutting into that money. I don’t think that’s a good idea because roads are long-term; this shortage, I hope, is short-term,” the Republican explained during a press conference.

Governor Braun acknowledged on Wednesday that suspending Indiana’s fuel duties has reduced state revenues significantly, yet he noted that extensions have provided “over a billion dollars’ worth of savings” for drivers. He stated that the state’s strong reserves made this possible.