Biden Pushes Congress for Three-Month Gas Tax Holiday

WASHINGTON — President Biden on Wednesday called on Congress to temporarily suspend the federal gasoline tax, an effort to give Americans “just a little breathing room” from soaring fuel prices, even as economists and lawmakers of both parties have expressed skepticism about the decision. a lot of difference.

In an afternoon speech, Mr. Biden asked Congress to lift federal taxes — about 18 cents per gallon of gasoline and 24 cents per gallon of diesel — through the end of September, shortly before midterm elections in the fall. The president has also called on states to suspend their own gasoline taxes, hoping to ease the economic pain that has contributed to his waning popularity.

“I fully understand that the gas tax exemption alone will not solve the problem,” Biden said. “But it will bring families immediate relief. Just a bit of breathing room as we continue to work to bring prices down over the long term. »

The White House faces an uphill battle to get Congress to approve the vacation. While the administration and some congressional Democrats have been discussing such a suspension for months, Republicans widely oppose it and have accused the administration of undermining the energy industry. Even members of Mr. Biden’s own party, including Speaker Nancy Pelosi, have expressed concern that businesses will absorb much of the savings, leaving little for consumers.

Sen. Mitch McConnell of Kentucky, the Republican leader, quickly rejected the president’s call to suspend the tax. “This administration’s big new idea is a dumb proposition that senior officials in its own party have already rejected well in advance,” he said.

Biden has said he wants to make sure consumers benefit from the federal tax moratorium. The administration believes that the combination of several possible measures – suspending the tax, halting state gasoline taxes and increasing the refining capacity of oil companies – would lower gasoline prices. at least $1 per gallon.

But critics have questioned the effectiveness of the gas tax holidays, dismissing the idea as nothing more than a desperate attempt by the White House and vulnerable Democrats to show the party is mindful of the financial struggles of Americans.

Economists and some members of Congress have criticized the idea of ​​suspending the federal gas tax as an unnecessary step for the government, given the revenue that would be sacrificed in an effort to provide only a small dose of relief to consumers. Its impact on them would be quite limited: the tax is now such a small slice of the price at the pump, representing less than 5% of the total cost, that Americans might not even notice its absence.

“I don’t think it changes the needle on people’s willingness to buy more, nor does it save them a lot of money,” said Garrett Golding, business economist at the Federal Reserve Bank. from Dallas. “Looks like something is being done to lower gas prices, but there’s not a lot of it out there.”

This year, oil and refined fuel prices have risen to their highest levels in 14 years due to Russia’s invasion of Ukraine, sanctions imposed on President Vladimir V. Putin and a rebound in the energy consumption as the United States recovers from the coronavirus pandemic. The White House has increasingly tried to blame Russia for the price hikes, a strategy that has done little to assuage American anxiety. The national average for regular gasoline was $4.95 a gallon on Wednesday, according to AAA, after hitting $5 this month.

Mr Biden also released strategic oil reserves and suspended a ban on summer sales of high-ethanol blended gasoline to try to temper price increases, frustrating climate activists still unhappy with the collapse of the President’s Climate and Social Spending Agenda.

Congress hasn’t raised the federal gas tax since 1993. But it has never lifted the tax either. Gasoline and diesel taxes now provide the majority of federal funding used to build and maintain highways — $36.5 billion in 2019 — though spending has exceeded dedicated revenue in recent years.

That means Mr. Biden’s latest step to address a political vulnerability could undermine funding for one of the key legislative achievements of his tenure: infrastructure investments.

“I was not in favor of gas tax relief because of the infrastructure implications there,” Senator Shelley Moore Capito, Republican of West Virginia, said Wednesday.

But one of the most common questions she hears from voters, she added, is: what about my essence?

“I think it’s a temporary solution,” Ms Capito said. “But yeah, people were like, ‘Do something’.”

Senator Rick Scott of Florida, chairman of the Senate Republicans’ campaign arm, wondered where the federal government would find the revenue normally generated from the gas tax that supports the construction of roads, bridges and other infrastructure projects in his state.

“What expenses are we going to cut?” he said, adding that the proposal to suspend the tax showed “Democrats know they’re in big trouble.”

Mr. Biden sought to allay those concerns on Tuesday.

“Look, it will have an impact, but it won’t have an impact on major road construction and major repairs,” he told reporters, adding that the administration had enough capacity to maintain roads.

The tax suspension would cost about $10 billion. Senior administration officials said Mr. Biden would ask Congress to dip into other pots of money to make up for the loss.

But as global demand for oil and a fractured market have driven prices up, experts have questioned how much a gas tax exemption would benefit consumers.

“Whatever you think of the merits of a gas tax exemption in February, it’s a worse idea now,” said Jason Furman, chairman of the Council of Economic Advisers under President Barack Obama. posted on Twitterarguing that the oil industry was likely to pocket most of the savings.

As an example, even if all the benefits were passed on to consumers, the owner of a Ford F-150 that goes 20 miles per gallon by driving 1,000 miles per month would save about $9 if the federal fuel tax gasoline was suspended.

Progressives and energy experts have advocated other ways to dampen shocks to gas prices or siphon off some of the inflated profits that oil companies and refiners have taken in as supply has remained constrained. In her 2008 presidential campaign, as inflation-adjusted prices approached an even higher point, Hillary Clinton proposed linking a gasoline tax exemption to a levy on oil company profits. .

But of the limited tools the federal government has to lower gas prices, lifting taxes may resonate the most with Americans.

“That’s what voters care about. That’s the thing politicians are concerned about,” said Erich Muehlegger, associate professor of economics at the University of California, Davis. “Things like a windfall tax on oil companies might be politically attractive, but we don’t necessarily think they will have an immediate impact on gas prices.”

Dr. Muehlegger’s research found that drivers adjust their consumption more in response to changes in gasoline prices than to market changes of a similar magnitude, in part because of the media attention generated by these changes.

Sen. Maggie Hassan, a Democrat from New Hampshire, who is facing a tough re-election bid, said Mr Biden should go further to relieve voters. In a statement, she said the White House should move forward with a gas tax suspension for the rest of the year, rather than just three months.

“I will continue to press my colleagues in Congress to suspend the gas tax, and I continue to urge the President to take executive action to immediately reduce energy costs for families,” he said. she stated.

States have more power to reduce gasoline prices, since their taxes and charges have increased steadily, to about 38 cents per gallon on average. So far, three states have enacted and completed gasoline tax exemptions: Maryland, Georgia and Connecticut. New York suspended its tax earlier this month, and Florida will lift its tax for October.

However, gasoline producers and retailers would most likely reap some of the benefits. An analysis by economists from the Penn Wharton Budget Model at the University of Pennsylvania showed that in states where gas price holidays have ended, between 58% and 87% of the value of the gas tax suspended gasoline were passed on to consumers, with suppliers absorbing the rest. A federal suspension would be so less than it could be obscured by volatility in the underlying price of oil, which has fallen over the past week.

Biden also plans to target oil companies on Wednesday, demanding they increase refining capacity to cut costs at the pump, just days after accusing executives of profiteering and ‘aggravating the pain’ for consumers . Even as refineries struggled to keep up with growing demand, refiners added less than 1% to their capacity globally.

Emily Cochrane, Catherine Edmondson and Stephanie Lai contributed report.

Leave a Comment