Biden Calls on Congress to Suspend Gas Tax for 3 Months Amid Soaring Energy Prices

President Joe Biden speaks about gas prices in the South Court Auditorium at the White House campus on June 22, 2022. (Drew Angerer/Getty Images)

President Joe Biden officially endorsed a suspension of federal and state taxes on gasoline and diesel on June 22.

Speaking at the White House, Biden urged Congress to temporarily lift the 18.4-cent-per-gallon federal tax on gasoline and 24.4-cent-per-gallon levy on diesel for three months, effective until the end of September.

He also pushed states to adopt equivalent relief for motorists. State taxes on fuel are higher than the federal level. Several states, including Connecticut and New York, have paused state fuel taxes. Other jurisdictions, such as California, have discussed direct relief and consumer rebates.

“We can bring down the price of gas and give families just a little bit of relief,” the president said in his prepared address. “I fully understand that a gas tax holiday alone is not going to fix the problem, but it will provide families some immediate relief, just a little bit of breathing room as we continue working to bring down prices for the long haul.”

Biden rejected Republicans’ assertions that it’s his administration’s fault for soaring energy prices. Instead, the president blamed Russian President Vladimir Putin’s invasion of Ukraine for surging oil and gas costs, referring to it again as “Putin’s price hike.”

“I said at the time, during the most serious aggression in Europe, to defend freedom was not going to go without cost for the American people,” he said. “And we’re going to have to pay a price as well.”

The president listed the actions that his administration has taken this year, including tapping into domestic reserves and encouraging nations around the world to release supplies. At a time when companies are enjoying record profits, Biden also urged the energy industry to pass on any savings to consumers.

“I’m doing my part. I want the Congress, the states, and the industry to do their part as well,” Biden said. “Bring down the price you are charging at the pump.”

A gas pump displays the price of fuel at a gas station in McLean, Va., on June 10, 2022. (Saul Loeb/AFP via Getty Images)

When all of these actions are combined, the White House projects that prices at the pump could decline by nearly $1 per gallon. This figure was calculated by considering the 18-cent federal gas tax, potential state relief that could average about 30 cents, retailers lowering prices by 25 cents, and nudging refiners to deploy their record profits to cut prices and expand capacity, which could result in about 66 cents in savings, according to a senior administration official.

“Gas prices are up almost $2 per gallon since Putin accelerated his military buildup,” the official told reporters in a June 21 conference call. “The president promised and remains committed to doing everything he can to reduce the impact of the price hike on the American people.”

With the summer driving season getting started and the exceptional costs that families and motorists are facing right now, the gas tax suspension is meant to address this “unique moment” in the United States, according to the White House.

A customer prepares to pump gasoline into her car at a Chevron station in San Rafael, Calif., on May 20, 2022. (Justin Sullivan/Getty Images)

Meaningful Relief?

The announcement comes as Energy Secretary Jennifer Granholm is scheduled to meet with seven of the nation’s top refiners this week to determine if there are near-term solutions that can help reduce sky-high energy prices.

Several policymakers expressed concern that imposing a federal gas tax holiday would eat into the Highway Trust Fund.

“Suspending the federal gas tax will not provide meaningful relief at the pump for American families, but it will blow a multi-billion-dollar hole in the highway trust fund,” House Transportation and Infrastructure Committee Chair Rep. Peter DeFazio (D-Ore.) said in a June 21 statement.

In a letter last week, Rep. Earl Blumenauer (D-Ore.) urged Biden to avoid a federal gas tax holiday, warning about the “severe unintended consequences” for infrastructure.

“While there is undoubtedly a need to provide American consumers relief from spiking costs, there is no guarantee a gas tax suspension would reduce prices at the pump or stem the broader inflation affecting the global economy, and it may only increase oil companies’ bottom lines,” Blumenauer wrote.

Gas prices displayed in San Clemente, Calif., on June 7, 2022. (John Fredricks/The Epoch Times)

White House officials dismissed these arguments, telling reporters that the president’s $1.6 trillion reduction in the federal deficit means the federal government can afford to tap into the fund and potentially rely on other revenue sources to fill the hole. Biden has also previously contended that funding from last year’s infrastructure law, which included $550 billion in total new funding, could be used to plug the gap.

Others within the president’s own party have been skeptical of the policy, including House Speaker Nancy Pelosi (D-Calif.), saying in April that while it’s “good PR ... there’s no guarantee that the saving—the reduction in the federal tax—that would be passed on to the consumer.”

Soaring Prices

Over the past year, the national average for a gallon of gasoline has soared by roughly 61 percent, according to AAA. A gallon of diesel has spiked by about 80 percent since last year.

According to an analysis from Kiplinger, state gas tax holidays could have a greater impact since they’re higher than the federal levy in 49 states. The financial news publisher doesn’t anticipate much savings for the average person with a federal gas tax holiday, while the overall tax revenue loss would be greater.

“A person who drives 12,000 miles a year in a car that averages 25 miles per gallon would only save $7.36 per month if the federal gas tax was suspended,” the analysis reads. “But on the other hand, the overall loss of tax revenue in the federal Highway Trust Fund would be high—estimated by the White House to be about $10 billion. That’s money that wouldn’t be available for road repairs and other needed infrastructure projects.”

In recent months, Biden has employed several measures to help curb oil and gas prices.

His administration tapped the Strategic Petroleum Reserves to release 1 million barrels per day over the next six months. He has also encouraged members of the Organization of Petroleum Exporting Countries, including Saudi Arabia, to boost production. He also issued a waiver on an ethanol ban, temporarily authorizing the sale of gasoline with large ethanol content during the summer months to combat rising gas prices.

West Texas Intermediate crude oil prices have eased over the past week, sliding about 10 percent to about $105 per barrel on the New York Mercantile Exchange. Crude prices have taken a substantial hit on growing recession fears, as investors are worried that a global economic downturn amid inflation and rising interest rates could reduce consumer and industrial demand.

According to Phil Flynn, an energy market analyst at The Price Futures Group, the tax relief won’t assist in resolving the fundamental issues in the U.S. petroleum market.

“The problem in the gasoline market is not the gasoline tax but the fact that refining capacity can’t keep up with demand,” Flynn wrote in a report. “If you lower the gasoline tax, that’s a great thing but it’s only going to cause demand to go higher as refiners are already producing gasoline at maximum capacity.”