Biden calls for three-month federal gas tax holiday

Dive Brief:

  • President Joe Biden urged Congress on Wednesday to suspend the federal gas tax until the end of September in a bid to lower soaring prices at the pump, which reached $5 per gallon nationwide earlier this month.
  • Lifting the federal 18-cent tax per gallon of gas and 24-cent tax per gallon of diesel for three months would “give Americans a little extra breathing room as they deal with the effects of Putin’s war in Ukraine,” the White House said in a fact sheet.
  • The Biden administration is asking Congress to use other revenues to make the Highway Trust Fund whole for the roughly $10 billion cost. The White House is also encouraging states to take further action to reduce gas prices, citing several states’ gas tax holidays as examples.

Dive Insight:

Trucking industry groups are skeptical of how much the proposal would help truckers, with the American Trucking Associations calling the latest proposal a gimmick.

“After months of touting the passage of the well-funded Infrastructure Investment and Jobs Act – a much-needed investment in our nation’s roads and bridges – the Biden Administration wants to cut that same highway system’s primary source of funding with a suspension of the federal fuel tax,” ATA President and CEO Chris Spear said.

When Maryland and other states announced temporary gas tax holidays earlier this year, the ATA and other groups pushed back saying it would do little to lower costs. The Owner-Operator Independent Drivers Association said in March that state gas tax holidays wouldn’t do “anything for the trucking industry.”

One reason: The International Fuel Tax Agreement, a tax paid to states for use of their roads, could negate any savings drivers collect from buying cheaper diesel in states suspending their gas taxes.

Another? Gas taxes fund the Highway Trust Fund that pays for roads, bridges and other projects that provide safe and reliable trucking routes. The Biden White House fact sheet did not specify what other revenues should cover the $10 billion hit to the federal Highway Trust Fund.

Gas tax holiday proposals, while generally popular with voters, have backfired politically before. Then-U.S. Sen. Barack Obama slammed a similar proposal by Sens. Hillary Clinton and John McCain as pure politics during the 2008 election, according to Reuters.

“This isn’t an idea designed to get you through the summer, it’s an idea designed to get them through an election,” Obama said at the time.

Jason Furman, who chaired Obama’s Council of Economic Advisors, predicted this week that most of the reduction in taxes would be “pocketed by industry – with maybe a few cents passed on to consumers.” 

“Whatever you thought of the merits of a gas tax holiday in February, it is a worse idea now,” Furman tweeted. “Refineries are even more constrained now so supply is nearly fully inelastic.”

Citing the heightened gas prices, the White House called it a “unique moment” that requires lawmakers to try to provide relief.

In remarks at the White House Wednesday afternoon, the president urged gas stations to pass along any savings they receive from a gas tax suspension and encouraged oil refiners to bring more capacity online to boost supply. He put the blame squarely on Russia’s war on Ukraine, framing the $2-per-gallon increase in prices since the invasion as the cost of defending global democracy.

“We could have turned a blind eye to Putin’s murderous ways,” he said. “The price of gas wouldn’t have spiked the way it has. I believe that would have been wrong.”

Biden acknowledged that the gas tax holiday, alone, “is not going to fix the problem.”

“But it will provide families some immediate relief,” he said.

Editor’s note: This story has been updated to include quotes from Biden and Spear.

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