President Joe Biden wants a three-month pause on the federal taxes layered into gasoline and diesel purchases to help drivers pay for gas.
After hinting earlier this week he was eyeing a gas tax holiday, Biden is scheduled on Wednesday afternoon to make a speech calling on lawmakers to suspend the tax. The federal tax for gasoline is 18.4 cents per gallon and 24.4 cents per gallon for diesel fuel.
National gas prices averaged $4.95 per gallon on Wednesday, according to AAA. California drivers were paying the most at $6.37 per gallon, while Georgia drivers were paying the least at $4.45, the data shows.
In a White House announcement Wednesday ahead of Biden’s remarks, the administration said a proposed halt until September is meant to “to give Americans a little extra breathing room.” The administration reiterated that the blame for the price surge falls on Russian President Vladimir Putin, with the Russian invasion of Ukraine roiling global oil markets.
The White House on Wednesday said Biden knew full well “that a gas tax holiday alone will not, on its own, relieve the run up in costs that we’ve seen. But the President believes that at this unique moment when the war in Ukraine is imposing costs on American families, Congress should do what it can to provide working families breathing room.”
In April, taxes accounted for 12% of the cost in a gallon of gas, according to the U.S. Energy Information Administration. Crude oil made up 60% of the price, the agency noted.
If the federal gas tax temporarily ceased, pickup truck drivers stood to save $5.52 every week, according to Patrick De Haan, head of petroleum analysis at GasBuddy. At the other end of the automotive spectrum, compact-car drivers would save $2.21.
In less than two weeks, AAA estimates a record-breaking 42 million people will hop in cars for Fourth of July travel. So what’s the chance for any price relief at the pump during a summer that’s estimated to be chock full of road trips?
Some early state-level clues suggest the “extra breathing room” Biden’s hoping for would be small.
States make efforts to reduce gas costs
Of course, the federal gas tax is levied in addition. to state-level taxes on gas. But some states have already taken matters into their own hands, and suspended their state gas taxes. The Biden administration on Wednesday said more state and local governments ought to consider what gas-tax pauses they can apply too.
When Maryland paused its 36.1-cents-per-gallon tax from mid-March to mid-April, 72% of the tax savings were passed along to drivers in the form of lower costs, according to researchers at the Penn Wharton Budget Model. That came to a reduction of 26 cents per gallon for Maryland drivers.
During Georgia’s halt, between 58% and 65% of the tax savings were passed along to drivers. That translated to savings of between 18.8 cents per gallon and 16.8 cents per gallon. On Wednesday, the state boasted the country’s cheapest gas on average, according to AAA data.
The state imposes a tax of 29.1 cents per gallon on gasoline and 32.6 cents per gallon for diesel, and the estimated tax savings vary. The pause was set to run through May, but it’s now slated to end July 14.
Connecticut’s own 25-cent gas tax pause, which began on April 1, is scheduled to end after June 30. So far, drivers in the Nutmeg State have seen between 71% and 87% of the tax savings passed along, researchers said. That’s a range between 17.9 cents per gallon and 21.7 cents per gallon, the researchers said.
The pauses on the gas tax — which typically go towards roads and infrastructure — are gaining some traction as gas prices keep increasing between consumer demand and the crude-oil price fallout from Russia’s invasion of Ukraine. That’s in the face of critics who have been wary of a tax pause with some panning it as a gimmick.
In early March, Penn Wharton Budget Model researchers estimated any federal gas tax halt could reduce a person’s average spending on gas between $16 and $47 in the cumulative span from March to December 2022, depending on various factors.
Biden could only apply the brakes on the federal gas tax with a Congressional law, according to Howard Gleckman, senior fellow at the Tax Policy Center. In February, some Congressional Democrats proposed a bill to put the tax on hiatus through the end of the year.
Gleckman said any gas tax break would be “a terrible idea” with dim odds for passage after Sen. Mitch McConnell, the Senate’s Republican minority leader, already dismissed the idea when it first emerged months ago. “If what you want to do is fight inflation, the last you want to do is increase demand for goods in short supply,” Gleckman said.
But the politics don’t neatly line up as the fight over gas tax breaks keeps playing out. In Virginia, for example, Democrats are against the tax break backed by Republicans.
“This seems less a matter of ideology,” Gleckman said, and more of “we’re just against what the other guy is proposing. It’s another variation of the politics of America in 2022.”