Gas prices have hit their highest level since 2022, now averaging over $4.50 nationwide, and as high as $6.16 in California. But that’s apparent to anyone at the pump. As the U.S. and Iran fail to reach an agreement to end the war and reopen the Strait of Hormuz, President Donald Trump is exploring new ways to relieve Americans’ pain when they fill up.
On Monday, Trump told CBS he was considering a suspension of the federal gas tax, a move that has never been done before (though former President Joe Biden did call on Congress to pass a gas tax holiday in July 2022 because of rising gas prices, which averaged $4.25 at the time). The move would eliminate the 18.4 cents per gallon collected on gas and 24.4 cents per gallon on diesel. The federal gas tax is specifically earmarked for the Highway Trust Fund (HTF), which the government uses to pay for infrastructure fixes.
While the suspension may sound like meaningful relief for consumers, experts say the move won’t lower prices by a significant amount, and that’s because the lost revenue would need to be offset elsewhere in the budget. Carl Davis, research director of the Institute on Taxation and Economic Policy, said it’s most likely to be added to the country’s already-hemorrhaging budget deficit.
“In practice what happens is it gets tacked on the debt,” he told Fortune.
Like the last time this was floated with Biden, the president can’t act on this move alone, as Congress holds the power of the purse. However, shortly after news broke Monday about the president’s desire to suspend the gas tax, Sen. Josh Hawley (R-MO) said in a post on X he was introducing legislation to do so.
Gas today averages $4.52 across the country, according to AAA, and many argue that it’s a tax on consumers that’s already too big to bear, especially for lower-income drivers and “super-commuters.” With the Strait of Hormuz still under a double blockade and Iran rejecting the U.S.’s most recent peace plan, it’s unclear when gas prices will fall. Sowing even more doubt, Energy Secretary Chris Wright said in an interview on “Face the Nation” over the weekend he doesn’t know either. The tax could offer a seemingly quick fix to what has already become a months-long inconvenience for American consumers.
“There’s definitely an attitude in Washington that taxes can just be repeatedly cut without consequence,” Davis said. Without bringing in revenue from the tax, the government would have to consider federal spending cuts to compensate for the lost revenue, he added.
Bumpy roads could be ahead, fiscally and literally
Several states have already enacted gas tax holidays to bring temporary relief to drivers, including Georgia, Indiana, and Utah, which are saving Americans 33 cents, 59 cents, and 6 cents per gallon respectively in those states. In contrast, Oregon Democrats just proposed a referendum for a gas tax hike.
While it’s not clear for how long the tax would be suspended if Congress approves a proposed bill, the HTF already runs at a deficit. The Tax Foundation projects the HTF will bring in $44.2 billion in 2026 and spend $61.4 billion by end of year. While a portion of the revenue brought in comes from taxes on new trucks in addition to those placed on gasoline and diesel, the fund has run a deficit for the last 20 years, according to the Tax Foundation, and the proposed tax pause won’t help. Despite rising costs for highway infrastructure, the U.S. hasn’t increased the tax since 1993.
“The federal gas tax hasn’t been updated in over 30 years,” Davis said. “And so the trust fund is repeatedly subsidized with money out of other areas of the budget.”
Aside from adding to the national debt—which earlier this month just encompassed the entire U.S. economy—the consequences could mean even bumpier roads ahead.
“It’s making sure there aren’t potholes that you’re going to have to go to the mechanic and get your car realigned,” Davis said. “It’s making sure the bridge you’re driving on is safe and isn’t going to collapse.” That revenue also helps alleviate traffic in busy areas, adding lanes and renovating roads to tamp down on bumper-to-bumper traffic.
Davis said it’s not at all clear if consumers will even reap the benefits of this tax cut. The tax is collected at the wholesale level, meaning the cut initially falls into the hands of fuel distributors, producers, and importers.
“You have to suspend the tax and then cross [your] fingers and hope that the industry has not fully passed through those tax cuts to drivers,” he said.
Without a clear benefit for drivers, Davis said those who benefit the most from the gas tax pause are politicians.
“It’s really for show,” he said. “It’s meant to be a signal that ‘we know price of gas is high and we want to do something about it.’”
