The Biden Admin Pushes A 3-Month Gas Tax Holiday. There Could Be A Catch
The help is welcome — but it could backfire, some experts and economists suggest.
The Biden administration is looking to give some relief by way of a potential temporary gas tax holiday in the face of expensive gasoline prices. The plan could certainly save people money at the pump, but critics point out some issues that could actually make the crisis potentially worse.
But there’s no denying that the cost of gas is hitting pockets. Gas, on average, currently costs just below $5 a gallon nationwide. Heavy pressure has been placed on the administration to offer some form of relief. Biden asked Congress on Wednesday to ask to suspend the federal gas tax temporarily.
The president formally made his case for a three-month federal tax holiday that would temporarily pause the tax of 18.4 cents per gallon of gas and 24.4 cents for diesel. "The administration is billing the gas tax holiday as a way to provide some 'breathing room' as it works to bring costs down over the long term," the publication reports. "The pause, which the White House envisions lasting through September, would require congressional approval."
The Biden administration is also calling on states to take action to bring relief to Americans.
But there are some criticisms of the plan. For one, economists have suggested that refineries will just pocket the most of the savings for themselves made during the gas tax holiday.
Nancy Pelosi, the House Speaker, said as much in April. “There's no guarantee that the saving – the reduction in the federal tax – would be passed on to the consumer.”
But, according to the Wharton School of the University of Pennsylvania, most of the cost savings during a past gas tax holidays go to the consumers, not companies. "In Maryland, 72 percent of all tax savings passed to consumers, the study found," USA Today noted when covering the research. "In Georgia, it was between 58 percent and 65 percent and Connecticut between 71 percent and 87 percent."
If companies don’t pocket the savings, it could be a quick way to help Americans save some money, but it might not help long term.
The Biden administration seems to understand this, too. "President Biden understands that a gas tax holiday alone will not, on its own, relieve the run-up in costs that we've seen. But the President believes that at this unique moment when the war in Ukraine is imposing costs on American families, Congress should do what it can to provide working families breathing room,” per a fact sheet released by the Biden White House.
CNN Business points out that reducing taxes — effectively lowering the price of gasoline — could encourage more use of gas, which will only complicate the already dwindling gas supply. "The risk is that at a time when the supply-and-demand balance that sets prices is already extremely out of balance, it would enable more Americans to hit the road," Patrick DeHaan, director of petroleum analysis at GasBuddy, told CNN Business. Throughout the crisis, the Biden administration has tapped into the country’s strategic petroleum reserves to help deal with the shortage, which has been made worse in no small part by the Russian invasion of Ukraine.
Other economists warn that the gas tax holiday could increase inflation even more once the 3-month break is over and taxes are reinstated, snapping back up 18.3 cents per gallon when the break is over. And, of course, there's the problem of what will fund the Highway Trust Fund, which gets its money through gas taxes and is responsible for transportation and mass transit projects. (The administration urged Congress to not take away money from the fund during the holiday.)
Another detractor of gas holidays comes from environmentalists who warn that encouraging more gas use is the opposite of what the administration has ostensibly been pushing towards — using more green energy, not more dirty energy.
It’s clear the plan won’t solve everything — the Biden administration admits that freely. But if applied effectively, it might help in the short term.