Biden pushes federal gas tax holiday

President Joe Biden Wednesday called for a three-month suspension of the federal gas tax — while holding the Highway Trust Fund harmless for the $10 billion hit — to provide relief from high gasoline prices.

He encouraged states to temporarily lift their own taxes and fees as well.

But the Congressional approval needed for a federal holiday remains in doubt, with Republicans opposed and top Democrats resistant.

President Joe Biden called for a three-month suspension of the federal gas tax.
Bloomberg News

Biden's call comes as the national average for regular gasoline rang in at $4.95 per gallon on Wednesday, down from $5 earlier this month, according to AAA.

A holiday would "give Americans a little extra breathing room as they deal with the effects of Putin’s war in Ukraine," according to a White House fact sheet.

The proposal would suspend the 18.4 cents per gallon gasoline tax and 24 cents per gallon diesel tax through September, the end of the fiscal year, and just ahead of the midterm elections.

Those rates have remained the same since 1993. The taxes are a key pillar of the Highway Trust Fund, which funds federal surface transportation programs and backs grant anticipation revenue vehicle, or Garvee, bonds. Biden’s proposal asks Congress to keep the trust fund whole by diverting $10 billion of other revenues into it. The $10 billion loss would mean about a 25% hit to the $42 billion projected to flow into the trust fund this calendar year.

Bills that would suspend the gas tax until January 2023 have already been introduced in both the House and the Senate but lack support to advance. The six-month suspension would have reduced gas tax revenues by about $20 billion.

With federal infrastructure spending outstripping the gas tax, the trust fund is already projected to hit insolvency in 2027.

The Infrastructure Investment and Jobs Act transferred $118 billion into the fund to boost it through fiscal 2026. That transfer, on top of other subsidies offsetting the holiday, is sufficient to protect Garvee payments in the short term, analysts have projected.

The federal excise tax, which is imposed on producers who pass it along to consumers, accounts for only about 4.61% of gasoline prices at the pump, according to a March analysis by the University of Pennsylvania’s Penn Wharton Budget Model.

The share of state taxes varies, with combined excise tax, other state taxes and fees ranging from 15.13 cents per gallon in Alaska to 68.15 cents per gallon in California. The average is 38.07 cents, the center said.

The center estimated that a federal gas tax holiday from March through December 2022 would have translated into a decrease in gasoline consumption expenditure per capita of between $17 and $67.

Congressional support appears doubtful at this point. House Speaker Nancy Pelosi in April derided the move as “very showbiz.”

House Transportation Chair Peter DeFazio, D-Ore., released a statement rejecting the proposal. “Although well-intentioned, this policy would at best achieve only minuscule relief while blowing a $10 billion dollar hole in the Highway Trust Fund that would need to be filled if we want to continue to fix crumbling bridges, address the spike in traffic deaths, and build a modern infrastructure system," he said, adding that it would undermine the infrastructure law by "reducing funds available to states to spend on infrastructure improvements."

House Ways and Means Committee Chair Richard Neal, D-Mass, told local reporters Tuesday that he was “not committed to it.”

Biden on Tuesday told reporters that he did not think a holiday would disrupt infrastructure spending. “Look, it will have some impact, but it’s not going to have an impact on major road construction and major repairs,” the president said.

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Infrastructure State tax revenues Transportation industry Bonds Washington DC Biden Administration
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