The Incidence of Fuel-Price Shocks and Tax Holidays: Evidence from the 2026 Oil Shock

Jacob T. Bradt () and Reid Taylor
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Jacob T. Bradt: https://liberalarts.utexas.edu/economics/faculty/jtb3862

No 2624, Working Papers from Federal Reserve Bank of Dallas

Abstract: We measure the distributional incidence of U.S. motor-fuel tax holidays using transaction records from ∼13,200 gasoline stations linked to neighborhood income. The 2026 Iran War raised gasoline expenditure shares 2.9 times more in the lowest- than highest-income census tracts. Pre-shock exposure accounts for 89% of the gap while the residual heterogeneity widens rather than offsets it. State-level tax holiday lowered retail prices but offset the same fraction (28%) of the per-gallon burden across quintiles. A counterfactual federal holiday preserves this incidence. Per-gallon relief is burden-proportional as it attenuates the shock’s level without correcting its regressive income gradient.

Keywords: gasoline tax holidays; pass-through; tax incidence; energy price shocks; distributional analysis (search for similar items in EconPapers)
JEL-codes: H22 H23 Q41 Q48 (search for similar items in EconPapers)
Date: 2026-08-06
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DOI: 10.24149/wp2624

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