Gas Prices: Biden Said to Be Considering Federal Gas Tax Holiday Again — What It Would Mean for Prices at the Pump
President Joe Biden has tried a little bit of everything to tame rising gas prices — from releasing emergency oil reserves to urging gas companies to ramp up production — but prices at the pump keep setting new record highs, regardless. Now the president is considering a federal gas tax holiday, according to The Hill.
The question is how much money consumers would save under such a move. The answer: probably not much.
Biden’s economic team has recently batted around the idea of a gas tax holiday and is expected to meet later this week for further discussions, The Hill reported on June 13. The move is designed to put a temporary halt to ever-surging gasoline prices. This week, the average national price pushed above $5 a gallon for the first time ever, according to AAA.
High gas prices (as well as high prices on products and services more broadly, due to inflation) have put pressure on Biden to figure out ways to ease some of the financial pain for Americans. A gas tax holiday in which consumers are not charged the federal gasoline tax — currently about 18 cents a gallon, according to the U.S. Energy Information Administration — is seen as a possible remedy.
This is not a new idea. As GOBankingRates previously reported, the White House and leading Democratic lawmakers considered a gas tax holiday as recently as February, when gas prices were still less than $3.50 a gallon.
As The Hill noted, suspending the federal gas tax would require an act of Congress. But given the public’s general horror over high gas prices, it might be an easy sell convincing Congress to push legislation through.
One supporter of a gas tax holiday is Robert Wolf, the former CEO of UBS Americas who served as an economic adviser to former President Obama.
“I know that some may view this as somewhat gimmicky because it will revert itself at some point, but a majority of the recent gas hike since the beginning of the year has been due to the Russian invasion,” Wolf told The Hill on Monday. “I think tying it solely to the war and setting an end date makes it more strategic and smart.”
How much money would drivers save if the gas tax were suspended? According to estimates released earlier this year by the Penn Wharton Budget Model, suspending the federal gas tax from March to December of 2022 would reduce average gasoline spending by only $16 to $47 for the full period.
About two-thirds of the tax cut would be captured by energy companies, according to Mark Zandi, chief economist at Moody’s Analytics. He also said the tax relief wouldn’t be targeted enough to reach lower- and middle-income Americans.
Meanwhile, highway infrastructure projects funded by the gas tax would be hampered if it were to be suspended, experts say.
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