Congress Takes a Serious Look at a Gas Tax Holiday—But Drawbacks Might Sink It
· Time
Four years ago, as Russia’s invasion of Ukraine sent the price of gas soaring, President Joe Biden called for suspending the federal gas tax. Lawmakers from both parties showed little appetite for the proposal—which would have sacrificed tens of billions in revenue needed for roads and bridges in exchange for minimal savings at the pump.
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Now, as gas prices approach nearly the same highs of 2022 amid the Iran War, President Donald Trump is floating an identical proposal. Only this time, there may be more interest on Capitol Hill.
“I’m going to,” Trump told reporters on Monday when asked whether he supported suspending the 18.4-cent-per-gallon federal gas tax, adding that prices would eventually “drop like a rock” once the war ends.
The debate reflects how sharply the politics of affordability have shifted as the extended closure of the Strait of Hormuz, a shipping corridor central to the world’s oil supply, disrupts global markets. The Labor Department reported on Tuesday that inflation climbed faster than at any point in the last three years in April as fuel and food prices surged. As gasoline prices hover around $4.50 a gallon nationally, Republicans who once derided gas-tax holidays as fiscally irresponsible are now softening their criticism.
The idea already had bipartisan backing in Congress. In March, shortly after the war began, Senators Mark Kelly of Arizona and Richard Blumenthal of Connecticut introduced legislation to suspend the federal gas tax through Oct. 1. On Monday, Senator Josh Hawley of Missouri introduced a Republican version that would last between 90 and 180 days and also apply to diesel fuel.
“They’re late to the party, but better late than never,” Blumenthal tells TIME. “The President’s support hopefully will give it some momentum in the Republican caucus.”
Senate Majority Leader John Thune, a South Dakota Republican, said Monday he had not historically supported suspending the tax, warning that it would leave “a big hole” in the Highway Trust Fund. “I think right now, the best thing that can happen for gas prices is for the Strait to get opened up again,” Thune told reporters.
The debate comes as both Democrats and Republicans are trying to frame themselves ahead of the midterms as the party of affordability. Even some small relief at the pump could give Trump the chance to claim credit for acting aggressively to lower prices —potentially blunting a key Democratic argument against him.
“I'll give him credit,” Kelly tells TIME. “People need relief… He’s stuck and he's out of ideas.”
But there’s a reason the federal gas tax has not been suspended since it was created in 1932. The actual savings for consumers could be modest while the financial cost to the federal government could be substantial.
During the 2008 presidential campaign, then-Sen. Barack Obama criticized a similar proposal backed by rivals in both parties. “We’re arguing over a gimmick that would save you half a tank of gas over the course of the entire summer,” Obama said at the time. “This isn’t an idea designed to get you through the summer, it’s designed to get them through an election.”
Limited savings
Suspending the federal gas tax would shave 18.4 cents off each gallon of gasoline and 24.4 cents off each gallon of diesel—though economists say consumers would probably see somewhat less savings once market factors are accounted for.
Research from the Bipartisan Policy Center estimated earlier this year that a suspension would likely lower prices by between 10 and 16 cents a gallon. For a driver filling a 16-gallon tank, that could translate into savings of roughly $2 to $3 per visit to the pump.
“It’s a small percentage but it’s still money,” Trump acknowledged Monday.
Kelly argued that even limited relief matters for families struggling with costs amplified by the war. He pointed to gas in Phoenix costing $4.80 a gallon and described hearing from constituents unable to afford long drives for medical care. “How many people like that are there across the country right now that just can’t afford to get anywhere?” he says.
The White House declined to comment on how long it would implement a pause on the federal gas tax, noting that Trump said it would remain in place “until it’s appropriate.” Hawley’s bill would suspend the federal levy for 90 days but could be extended to 180 days if the President determines “that economic conditions merit an additional suspension.” The latter date would likely fall after the November midterm elections.
Hawley told reporters Monday that he had not spoken directly with Trump about his bill, and Trump has not indicated if he supports that timeline. Blumenthal says his proposal of a gas tax holiday might need to be extended until past Oct. 1 as talks to reopen the Strait have yielded little progress.
Some states have experimented with their own tax holidays. Indiana and Georgia temporarily suspended state gas taxes earlier this year, while Utah approved a six-month reduction set to begin this summer. Other states, including New York and Pennsylvania, have weighed similar measures.
The Committee for a Responsible Federal Budget, a nonpartisan organization, estimated that a one-month federal gas-tax holiday would cost roughly $3.5 billion in lost revenue, while a six-month suspension would cost about $21 billion and accelerate the projected insolvency of the Highway Trust Fund. CRFB warned that any consumer savings would likely be partially offset by higher pre-tax gasoline prices and broader inflationary effects.
The energy shock has become one of the clearest domestic political consequences of the conflict Trump started in February, with the issue becoming a flash point in races around the country. As the political pressure intensifies, even some conservatives who once dismissed the idea outright are softening their opposition. Republican Sen. John Cornyn of Texas, who is locked in a tight primary race for re-election and previously called a gas-tax holiday “a good way to bankrupt the country,” walked back those comments on Monday saying that he could support a temporary suspension.
“It reflects desperation in their party,” Blumenthal says. “Trump’s failure to do it before now is part of the disastrous miscalculation he made in getting into this war and failing to heed the obvious eventuality that the Strait would be gone.”