Washington – President Joe Biden on Wednesday called on Congress to suspend federal taxes on gasoline and diesel for three months – an idea that aims to ease financial pressures at the pump, but also reveals the political toxicity of high fuel prices. gasoline in an election year.
It also urges states to suspend their own gasoline taxes or provide similar relief, the White House said.
The White House said in a statement: “The price of gas has risen dramatically around the world, and by nearly $2 a gallon in America, since (Russian President Vladimir) Putin began amassing troops on the Ukrainian border”.
In question, the federal tax of 18.4 cents per gallon on gasoline and the federal tax of 24.4 cents per gallon on diesel fuel. If the gas savings were fully passed on to consumers, people would save about 3.6% at the pump, with prices averaging about $5 a gallon nationwide.
But many economists and lawmakers in both parties view the idea of a gas tax exemption with skepticism.
Barack Obama, during the 2008 presidential campaign, called the idea a “trick” that allowed politicians to “say they did something”. He also warned that oil companies could offset the tax relief by raising their prices.
High gas prices pose a fundamental threat to Mr. Biden’s electoral and political ambitions. They have driven confidence in the economy to low levels that bode ill for the defense of Democratic control of the House and Senate in November.
The president’s past efforts to cut gasoline prices — including the release of oil from the U.S. strategic reserve and greater blending of ethanol this summer — have done little to produce savings at the pump, a risk that carries over to the idea of a gas tax exemption.
Mr Biden has acknowledged how gas prices have weighed on public enthusiasm as he tries to convince people that the United States can still pivot to a clean energy future. In an interview with The Associated Press last week, he described a country that is already healing psychological scars fromc who now worries about how to afford gasoline, food and other necessities.
“If you notice, until gas prices started to go up,” Mr. Biden said, “things were a lot more, they were a lot more optimistic.”
The president can do remarkably little to fix the prices that are set by global markets, for-profit corporations, consumer demand and the aftershocks ofand subsequent embargoes. The underlying problem is a a challenge that a tax holiday cannot necessarily solve.
Mark Zandi, chief economist at Moody’s Analytics, estimated that the majority of the 8.6% inflation seen over the past 12 months in the United States has come from rising commodity prices due to the invasion. Russia and continued disruption due to the coronavirus.
“In the immediate term, stemming the rise in oil prices is essential,” Zandi said last week, suggesting that Saudi Arabia, the United Arab Emirates and a nuclear deal with Iran could help boost supply and lower prices.
Republican lawmakers have tried to shift the blame further onto the president, saying he has created a hostile environment for domestic oil producers, causing their production to remain below pre-pandemic levels.
Senate Republican Leader Mitch McConnell scoffed at the idea of a gas tax exemption in a speech in February. “They spent an entire year waging a holy war on affordable American energy, and now they want to use a bunch of taxpayer money to hide the consequences,” he said.
And Democratic House Speaker Nancy Pelosi has previously expressed doubts about whether to suspend the tax. At the end of April, when asked about the possibility of a federal gas tax exemption, she replied: “The advantages are that it is good communication”, then added: “The disadvantages are that is that there’s no guarantee that the savings – the federal tax reduction – would be passed on to the consumer. We had no evidence to suggest that the oil companies would pass that on to the consumer.
She also told reporters, “We have to pay for this.” The funds for such a tax holiday would come from the Highway Trust Fund, she said, “and we can’t have that shortfall there.”
“The question is,” she said at the time, “Is it worth going out and getting the money, coming back to cover the shortfall and the trust fund, to get a pause for big oil companies?”
Administration officials argue that the $10 billion cost of the gas tax exemption would be paid and the Highway Trust Fund would remain intact, even though gas taxes are a source of revenue substantial for the fund. Officials did not specify new sources of income.
The president also called on energy companies to accept lower profit margins to increase oil production and gasoline refining capacity.
This increased tensions with oil producers: Mr Biden judged that the companies were making “more money than God”. This set off a series of events in which Chevron chief Michael Wirth sent a letter to the White House saying the administration “has widely sought to criticize, and at times vilify, our industry.”
Asked about the letter, Mr Biden said of Wirth: “He’s slightly sensitive. I didn’t know they would get hurt so quickly.”
Energy companies are due to meet with Energy Secretary Jennifer Granholm on Thursday to discuss ways to increase supply.
Still, the White House stressed Wednesday that “already the United States has produced more oil in the first year of this administration than in the first two years of the previous administration, and is on the right track.” to set new records next year.”
Rebecca Kaplan contributed to this report.