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What Is a Gas Tax Rebate?

A car's gas cap.
A man filling up his gas tank.
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  • Written By: Geri Terzo
  • Edited By: C. Wilborn
  • Last Modified Date: 29 March 2014
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A gas tax rebate is government-distributed refund for taxes already paid, returned to citizens or entire cities. Rebates can be direct, in the form of a check, or indirect, through various types of cost savings. Gas tax rebates may be offered to ease the pain of high prices at the gas pump or in an attempt to stimulate a national or local economy. A government might also be prompted to issue a regional gas tax rebate to low-income residences in order to cushion the blow of a gas tax increase throughout an entire nation.

Gas taxes are a necessary evil in most economies around the world. Energy prices can be volatile, and a country that is dependent on oil imports does not have control over production and prices for crude oil, which is used to make gasoline for transportation. A squeeze on oil prices or any decline in production can damage a nation's economy. As a result of this vulnerability, many countries rely heavily on revenue from gasoline taxes to improve transportation and infrastructure or for paying down national debt. Every so often, however, a regional government is able to return some payments to its citizens.

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A gas tax increase and a gas tax rebate are often coupled together. The burden of a gas tax increase can be heavy on taxpayers, especially those in a low income bracket. In order to generate support for price inflation, a gas tax rebate might be offered alongside the increase. The payout may be a uniform amount distributed to low income drivers, although there are other forms of relief.

Gas tax rebates may distributed to local municipalities by a regional government as steady income to provide a dependable form of revenue. These funds are intended to allow local governments to plan for the long term and address local infrastructure needs. The distributions may be part of a broader energy program, and payments can remain ongoing for several years.

When a gas tax rebate is directed at drivers, it may come in the form of a uniform check distributed to poor residents. In other cases, a region may require that a driver submit gasoline receipts with a yearly tax return prior to issuing any payments. Tax relief may also come in the form of a "gas tax holiday," as was proposed in the US during an energy crisis in 2008. This is a moratorium on federal gas taxes for a period of time to ease the burden of high energy prices.

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