President Joe Biden will ask Congress on Wednesday to suspend the federal gas tax until September as Americans across the country grapple with soaring prices at the pump.
The president will urge members of Congress to institute a three-month federal gas tax exemption without stripping money from the Highway Trust Fund, which funds highways and public transit.
“I want to be very clear, the president is calling on Congress to take this step to help American families without hurting the Highway Trust Fund, which is funded by these taxes,” a senior administration official said Tuesday evening.
The official suggested that reducing the federal government’s budget deficit by $1.6 trillion this year gives the United States leeway to suspend the gas tax while using other revenues to supplement the Highway Trust Fund at a cost of approximately $10 billion.
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The federal government currently charges 18 cents in taxes per gallon of gasoline and imposes a 20% tax on each gallon of diesel, the official said.
Biden will also call on states, oil companies and retailers to suspend gasoline taxes. The Penn Wharton Budget Model released estimates on Wednesday revealing that gas tax holidays in Georgia, Maryland and Connecticut saved consumers money at the pump. Most of the savings in these areas have gone to consumers rather than gas stations and others in the energy sector.
The price of gas began to skyrocket last fall and has continued to rise following the invasion of ukraine at the end of February, although the administration considers the increase in gasoline prices to be “Putin’s price hike”.
“[Biden] believes that states, oil companies and retailers have a unique responsibility at this time – to do their part to improve Putin’s price hike,” the official said. “He calls on states to suspend their gasoline taxes or find other ways to provide the same. relief, such as consumer rebates or relief payments. »
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The official further said that the President was pushing for the gas industry and oil retailers to reduce the price of gas as oil prices began to fall.
“He also calls on the industry to leverage its record profits and ramp up refining supply and capacity to drive down gas prices and specifically calls on major oil refineries to come up with concrete solutions when the Secretary at the energy is calling them later this week,” the official said.
“And when the cost of oil drops like it has for the past two weeks, the President calls on retailers to properly lower their prices and pass the savings on to consumers,” the official continued.
The national average for a gallon of gas is currently around $5. Prior to this year, the highest national gas price average ever recorded by AAA was $4.114 per gallon in July 2008.
The president accused oil refiners of driving up gas prices in letters sent last week to seven refinery operators, including Chevron, ExxonMobil and BP. But oil refiners said their ability to produce additional gas and diesel was limited.
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The American Petroleum Institute and American Fuel & Petrochemical Manufacturers sent a joint letter to Biden last week indicating that refineries are already operating near maximum capacity and that almost half of the capacity taken offline was due to the conversion of installations for the production of renewable energy.
And Chevron CEO Michael Wirth wrote a letter to Biden on Tuesday stressing that the company is working every day to “help supply the world with the energy it needs and improve the lives of billions of people who depend on these supplies”.
He continued, “Despite these efforts, your administration has largely sought to criticize, and at times vilify, our industry. These actions are not beneficial to addressing the challenges we face and are not what the American people deserve.
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Energy Secretary Jennifer Granholm will meet with the seven major refineries later this week to discuss how the federal government can help increase refining capacity.
Biden’s ex-boss, former President Barack Obama, called a gas tax a “trick” on the campaign trail in 2008. At the time, Obama said a tax holiday on gasoline was a “trick” to save Americans half a tank of gas over the summer so lawmakers could “say they did something.”
There are also concerns about the impact of a gas tax exemption on already record inflation. The Committee for a Responsible Federal Budget, a nonpartisan group advocating for federal budget cuts, formerly argued that suspending the tax for a period of 10 months could actually increase demand for gasoline and other goods and services when the economy is already facing strong consumer demand and supply chain disruptions pandemic-induced supply.
“While the gasoline tax exemption may reduce prices at the pump, it will still increase demand for gasoline and other goods and services at a time when the economy has little capacity to absorb,” the blog read. “The result could be even higher inflation rates in 2023.”