Biden asks Congress to suspend gas tax for three months
The suspension could shave off 18 cents per gallon as Americans face record gas prices.
President Biden on Wednesday asked Congress to suspend the federal gas tax through September, a move that he said could shave off 18 cents per gallon and “give families just a little bit of relief.”
The president also requested that states temporarily suspend their fuel taxes and for oil companies to lower costs.
The proposed suspension comes as Biden and Democrats are facing a tough midterm election season with Americans confronting high fuel costs, spiking inflation and fears of a recession. It is not clear whether Biden can persuade Congress to go along with the gas tax holiday as Republicans and some Democrats expressed skepticism about whether it would end up saving drivers money.
The national median gas price set a record last week, topping $5 per gallon, according to the American Automobile Assn., though it has since dropped below that mark. As of Wednesday, California had the highest average gas price of any state, at $6.371 per gallon. The gas tax suspension would reduce the cost of a gallon of diesel fuel by 24 cents.
Biden asked oil companies to not circumvent the gas tax holiday, if it is enacted, by raising their prices. Instead, he said, they should give “every penny” to consumers. He also asked them to take other measures to lower overall costs and to reinvest their profits in increasing supplies.
The chances of Congress, states and oil companies agreeing to Biden’s pitch are unclear. If they do, the cost per gallon could drop by $1 or more, the president said.
State levies on gas tend to be higher than the federal tax. In California, for example, consumers pay 56.6 cents per gallon of gasoline and 65.9 cents for diesel, according to the Federation of Tax Administrators.
Biden asked lawmakers to ensure the suspension doesn’t hurt the Highway Trust Fund, which is partially funded by the federal gas tax. The fund helps pay for transportation projects.
Many congressional Democrats expressed support for Biden’s proposal, and some even called for the suspension to run through the end of the year.
GOP lawmakers, on the other hand, are not likely to go along with the plan. They have been hammering Biden and Democrats on the campaign trail over inflation and fuel prices. Voters have consistently cited concerns over the economy, inflation and gas prices as their top concerns heading into the November midterm.
Republicans have argued that gas tax suspensions amount to political theater that will do little to make long-term dents in oil prices. The best way to reduce prices, they say, is to loosen regulations and increase U.S. oil production.
Rep. Tom Cole (R-Okla.) said in a statement that any tax holiday “could exacerbate inflation and the federal deficit.”
“This is a transparently partisan political stunt and a fundamentally bad idea,” he added.
Sen. Mitch McConnell of Kentucky — the Republican minority leader whose support would likely be necessary to get a bill through the evenly divided Senate — said the tax holiday proposal is an “ineffective stunt to mask the effects of Democrats’ war on affordable American energy.”
Some Democrats are also skeptical of the suspension’s efficacy.
Rep. Peter A. DeFazio (D-Ore.) called the proposal “short-sighted” and said it would require the “cooperation of oil companies to pass on minuscule savings to consumers.”
“Suspending the federal gas tax will not provide meaningful relief at the pump for American families, but it will blow a multibillion-dollar hole in the Highway Trust Fund, putting funding for future infrastructure projects at risk,” DeFazio said.
Howard Gleckman, a senior fellow at Urban-Brookings Tax Policy Center at the Urban Institute, wrote in a blog post that the suspension “is a terrible idea” and said the impact would be “modest,” saving the average driver less than $10 per month.
The tax suspension would give a “windfall” to the same oil companies Biden has accused of price gouging and eliminate a vital funding source for infrastructure projects, Gleckman wrote.
Though the holiday “may reap Biden small short-term political benefits,” Gleckman said, it might ultimately harm consumers. “Suspending the tax would only worsen inflation,” he said.
Any downturn is likely to be mild because many consumers have a financial buffer and the labor market still has legs.
Gas prices dropped in 2020 when employees cut back on commuting and families limited their leisure travel in response to COVID-19 restrictions. In response, oil-producing countries curbed supplies even as the pandemic was easing and people were returning to the office and hitting the road on vacations.
The price rose further when the U.S. and its allies imposed tough sanctions on Russia over its invasion of Ukraine. The sanctions have made it more difficult for Russia to sell its oil. Biden has also banned the import of Russian oil, and last month Europe announced it was imposing a partial embargo on it.
As of 2020, Russia was the world’s third-largest producer of petroleum, according to the U.S. Energy Information Administration.
President Biden announces the U.S. will ban Russian oil imports, the latest sanction against the Kremlin over its unprovoked war in Ukraine.
The president and his party have accused oil companies of engaging in price gouging, and they also blame Russian President Vladimir Putin for the rise in prices.
“Let’s remember how we got here,” Biden said. “Putin invaded Ukraine.”
“We could’ve turned a blind eye to Putin’s murderous ways. And the price of gas wouldn’t have spiked the way it has,” Biden said. “I believe then and I believe now the free world had no choice. America could not stand by ... and just watch Putin’s tanks roll into Ukraine and seize a sovereign country.”
“If we did stand by, Putin wouldn’t have stopped,” he said. “Putin would’ve kept going and we would face an even steeper price.”
A closely divided House has approved legislation to crack down on alleged price gouging by oil companies as prices at the pump continue to soar.
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