As the war in Iran pushes U.S. gas prices toward $4 a gallon nationally, some lawmakers are pushing to suspend the federal gasoline tax in the latest attempt to try to control surging energy costs.
Lawmakers say the action would provide much-needed relief for families and businesses that rely on their cars and trucks to get to work and school and run everyday errands.
Asked about the gas tax at a Cabinet meeting Thursday, President Donald Trump said he has “thought about” suspending it but suggested states should consider suspending their fuel taxes.
“People have talked about” a gas tax suspension, Trump said. “It’s something we have in our pocket if we think it’s necessary.”
As gas prices have spiked, the Trump administration has released millions of barrels of oil from the U.S. Strategic Petroleum Reserve and temporarily lifted sanctions on some Russian and Iranian oil shipments already at sea. The U.S. is negotiating with countries reliant on Middle East crude to join a coalition to police the Strait of Hormuz, where about one-fifth of the world’s traded oil normally flows.
Here’s a look at what a gas tax holiday is and its potential impacts.
Temporary suspension of the federal gas tax
A gas tax holiday is a temporary suspension of the federal gas tax, currently set at 18.4 cents per gallon on gasoline and 24.4 cents per gallon on diesel fuel. That does not include state taxes, which often are higher.
The tax provides more than $23 billion per year in revenue for federal highway and public transit programs.
The president cannot suspend the federal tax on his own. Congress would have to approve the move.
Both the House and Senate are controlled by Republicans, and bills on the issue are unlikely to advance unless Trump signals his support.
Suspending the tax could provide some relief
Rising gas prices are putting renewed pressure on household finances, especially for low- and middle-income Americans who have less flexibility to absorb higher transportation costs. The increases can influence how much people drive, where they travel and how they spend money on other things.
“Trump’s war of choice with Iran is driving up gas prices across the country — and Americans shouldn’t have to bear the additional economic burden of Trump’s reckless decision making,” said Sen. Richard Blumenthal, a Connecticut Democrat who co-sponsored the Gas Prices Relief Act with fellow Democratic Sen. Mark Kelly of Arizona.
The bill would suspend the tax through Oct. 1. A similar measure was sponsored in the House by Democratic Rep. Chris Pappas of New Hampshire.
There are drawbacks, industry group says
The gasoline tax is the single largest source of revenue for federal highway and public transit programs.
While the House and Senate bills would offset any lost Highway Trust Fund revenue with general funds, the tax suspension could raise the federal deficit and jeopardize the long-term sustainability of investments for highway and public transit programs, according to the American Road & Transportation Builders Association, which represents the transportation construction industry.
The group cites studies showing that many retailers do not pass on the full amount of the gas tax reduction to consumers. Research also suggests that state and federal gas taxes are just one component of a complex pricing scheme that includes the global price of oil and other factors, the group said.
States are considering their own gas tax breaks
Some states are taking action to lower the gas tax. Georgia Republican Gov. Brian Kemp on March 20 signed into law a 60-day suspension of the state’s 33-cents-per-gallon tax on gas and 37-cents-per-gallon tax on diesel.
The law was supported by both Republicans and Democrats. Kemp said he wanted to “return taxpayer money where it belongs, in the pockets of hardworking Georgians.”
Early results are positive for Georgia drivers. It takes a few days or more for the tax holiday to trickle through to pump prices, because wholesalers pay fuel taxes in the state. But while gas prices nationwide went up an average of 10 cents per gallon in the week that ended Thursday, they fell 15 cents a gallon in Georgia, according to motorist group AAA. On Friday, the state had the 13th-lowest average gas price among states at $3.60 per gallon. Kansas was the lowest at $3.27.
Several states — including California, Connecticut, Florida, Maryland and Utah — have weighed gas tax holidays as a way to provide relief at the pump.
Connecticut Democratic Gov. Ned Lamont recently suggested a temporary suspension of the state’s 25-cent-per-gallon tax on gasoline and 48.9-cent diesel tax, but it remains unclear whether it will happen. State officials are also discussing possible rebate checks for taxpayers to help blunt high energy costs.
Florida Republican Gov. Ron DeSantis, who has supported past gas tax holidays, was skeptical that motorists would see real savings.
“Our ability to influence fuel prices are really marginal,” DeSantis said at a bill signing ceremony this month, according to Politico. “Sometimes the prices get raised so the consumer doesn’t see any difference. … I think when we did it in the past … I don’t think the consumer really felt relief.”
Driving habits can help reduce costs
The top advice for drivers looking to save at the pump is to obey the speed limit and drive smoothly, according to Consumer Reports. Driving habits can play a significant role in fuel economy, the magazine says.
Driving at a steady 55 mph can increase fuel economy by 6 to 8 mpg, the publication said in a report that offered tips to get the most out of a tank of gas. “Speeding up from 55 to 75 mph is like moving from a compact car to a large SUV,” the article said.
Beyond fuel concerns, speeding also is a safety risk. And drivers should avoid hard acceleration and braking whenever possible, and skip premium gas if their cars allow it, the magazine said
