What a gas tax holiday would actually do

Source: Axios · Bias: Center Left

Summary

The gasoline price surge is reigniting political chatter about suspending the federal tax on the fuel to help consumers, thanks to a recent round of populist proposals from high-profile Democrats.Why it matters: It's one of those go-to ideas that never actually happens, but often surfaces when prices climb.Congress would have to approve a suspension of the gas tax, and so far, it never has.But political winds could shift in these not-normal times, with no end in sight to the throttling of global oil shipments.The big picture: Pump costs are spiking anew this week, with the U.S. average now $4.46 per gallon on Monday, per AAA, and more increases looming.Between the lines: Suspending the 18.3 cent-per-gallon gas tax and 24.3 cent diesel tax would bring some relief to consumers.But it wouldn't come close to offsetting the nearly $1.50-per-gallon gas price jump since the war started.By the numbers: In late April, when gasoline prices were lower but still well above $4, the Bipartisan Policy Center estimated that suspending the tax would cut retail prices by 9%-14% per gallon.Most, but not all, of the of the suspension gets passed along to consumers, it notes, because suppliers take a cut.And a tax holiday, depending on the duration, would slash federal revenues used for maintaining the nations' highways.Catch up quick: Some high-profile Democratic politicians are pressing the idea now.One is James Talarico, the Democratic Senate nominee in Texas, who may be competitive-ish in his closely watched race.Talarico's April proposal targets both the 18.3 cent per gallon gasoline tax and the 24.3 cent diesel tax.Another is Sen. Mark Kelly (Ariz.), a potential White House candidate, who floated legislation in March.State of play: The respected energy consultancy Rapidan Energy Group sees 25% odds — hardly trivial! — that Congress takes the leap.Those odds will rise the longer the disruption persists and the more prices climb, Glenn Schwartz, the firm's director of energy policy, tells me via email.Yes, but: It's not among President Trump's various policies in recent weeks to ease the price shock. But the White House isn't shutting any doors."While the Administration is always considering ways to mitigate these short-term disruptions in the energy markets, a gas tax suspension is not currently under consideration," a White House official said.How it works: Federal fuel taxes support the nation's Highway Trust Fund, the Eisenhower-era system for maintaining and expanding the nation's transport infrastructure.That's one reason why lots of good-government advocates really dislike gas tax suspensions.The fund already spends more than taxes bring in, requiring other federal funds to compensate, and the problem is getting worse as cars get more efficient and more people drive EVs.Zoom in: The Bipartisan Policy Center projects that suspending the gas and diesel taxes for five months would cut revenue by $17 billion, or 46% of the estimated fiscal year 2026 inflows from those taxes.Income and payroll taxes would be modestly higher, so the think tank sees a federal deficit rise of $12 billion.Reality check: While Georgia and Indiana have temporarily suspended certain state fuel taxes, it's not clear if there's a groundswell in either party in Congress."I'm not sure a gas tax suspension will get any momentum because this is a crisis the Trump Administration created and only they can end," Josh Freed, senior VP for energy at the centrist Democratic think tank Third Way, tells Axios.He said it would be an expensive "band aid" that would not provide real relief.The bottom line: Check the temperature — literally and figuratively — if the conflict drags on for months.The onset of summer driving season and looming midterms could raise political pressure to go where no Congress has ever gone before.

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What a gas tax holiday would actually do
Axios

What a gas tax holiday would actually do

Center Left

The gasoline price surge is reigniting political chatter about suspending the federal tax on the fuel to help consumers, thanks to a recent round of populist proposals from high-profile Democrats.Why it matters: It's one of those go-to ideas that never actually happens, but often surfaces when prices climb.Congress would have to approve a suspension of the gas tax, and so far, it never has.But political winds could shift in these not-normal times, with no end in sight to the throttling of global oil shipments.The big picture: Pump costs are spiking anew this week, with the U.S. average now $4.46 per gallon on Monday, per AAA, and more increases looming.Between the lines: Suspending the 18.3 cent-per-gallon gas tax and 24.3 cent diesel tax would bring some relief to consumers.But it wouldn't come close to offsetting the nearly $1.50-per-gallon gas price jump since the war started.By the numbers: In late April, when gasoline prices were lower but still well above $4, the Bipartisan Policy Center estimated that suspending the tax would cut retail prices by 9%-14% per gallon.Most, but not all, of the of the suspension gets passed along to consumers, it notes, because suppliers take a cut.And a tax holiday, depending on the duration, would slash federal revenues used for maintaining the nations' highways.Catch up quick: Some high-profile Democratic politicians are pressing the idea now.One is James Talarico, the Democratic Senate nominee in Texas, who may be competitive-ish in his closely watched race.Talarico's April proposal targets both the 18.3 cent per gallon gasoline tax and the 24.3 cent diesel tax.Another is Sen. Mark Kelly (Ariz.), a potential White House candidate, who floated legislation in March.State of play: The respected energy consultancy Rapidan Energy Group sees 25% odds — hardly trivial! — that Congress takes the leap.Those odds will rise the longer the disruption persists and the more prices climb, Glenn Schwartz, the firm's director of energy policy, tells me via email.Yes, but: It's not among President Trump's various policies in recent weeks to ease the price shock. But the White House isn't shutting any doors."While the Administration is always considering ways to mitigate these short-term disruptions in the energy markets, a gas tax suspension is not currently under consideration," a White House official said.How it works: Federal fuel taxes support the nation's Highway Trust Fund, the Eisenhower-era system for maintaining and expanding the nation's transport infrastructure.That's one reason why lots of good-government advocates really dislike gas tax suspensions.The fund already spends more than taxes bring in, requiring other federal funds to compensate, and the problem is getting worse as cars get more efficient and more people drive EVs.Zoom in: The Bipartisan Policy Center projects that suspending the gas and diesel taxes for five months would cut revenue by $17 billion, or 46% of the estimated fiscal year 2026 inflows from those taxes.Income and payroll taxes would be modestly higher, so the think tank sees a federal deficit rise of $12 billion.Reality check: While Georgia and Indiana have temporarily suspended certain state fuel taxes, it's not clear if there's a groundswell in either party in Congress."I'm not sure a gas tax suspension will get any momentum because this is a crisis the Trump Administration created and only they can end," Josh Freed, senior VP for energy at the centrist Democratic think tank Third Way, tells Axios.He said it would be an expensive "band aid" that would not provide real relief.The bottom line: Check the temperature — literally and figuratively — if the conflict drags on for months.The onset of summer driving season and looming midterms could raise political pressure to go where no Congress has ever gone before.

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