President Joe Biden on Wednesday will call on Congress to suspend federal gasoline and diesel taxes for three months — an election year move meant to ease financial pressures at the pump as the public is increasingly concerned about high gas prices and inflation.
The Democratic president will also call on states to suspend their own gas taxes or provide similar relief, the White House said.
At issue is the 18.4 cents-a-gallon federal tax on gas and the 24.4 cents-a-gallon federal tax on diesel fuel. If the gas savings were fully passed along to consumers, people would save roughly 3.6% at the pump when prices are averaging about $5 a gallon nationwide.
It’s unclear, though, if Biden could push such a proposal through Congress, where many lawmakers, including some in his own party, have expressed reservations. And even many economists view the idea of a gas tax holiday with skepticism.
Barack Obama, during the 2008 presidential campaign, called the idea a “gimmick” that allowed politicians to “say that they did something.” He also warned that oil companies could offset the tax relief by increasing their prices.
Biden energy adviser Amos Hochstein pushed back on Wednesday, saying consumers could save about 50 cents per gallon if Congress and the states heed the president’s call.
“That’s not a gimmick,” Hochstein, senior adviser for global energy security at the State Department, said on CNN. “That’s a little bit of breathing room for the American people as we get into the summer driving season.
It was not immediately clear if the White House has the votes in Congress to suspend the federal tax.
High gas prices pose a fundamental threat to Biden’s electoral and policy ambitions. They’ve caused confidence in the economy to slump to lows that bode poorly for defending Democratic control of the House and the Senate in November.
Biden’s past efforts to cut gas prices — including the release of oil from the U.S. strategic reserve and greater ethanol blending this summer — have done little to produce savings at the pump, a risk that carries over to the idea of a gas tax holiday.
Biden has acknowledged how gas prices have been a drain on public enthusiasm when he is trying to convince people that the U.S. can still pivot to a clean-energy future. In an interview with The Associated Press last week, Biden described a country already nursing some psychological scars from the coronavirus pandemic that is now worried about how to afford gas, food and other essentials.
“If you notice, until gas prices started going up,” Biden said, “things were much more, they were much more optimistic.”
The president can do remarkably little to fix prices that are set by global markets, profit-driven companies, consumer demand and aftershocks from Russia’s invasion of Ukraine and the embargoes that followed. The underlying problem is a shortage of oil and refineries that produce gas, a challenge a tax holiday cannot necessarily fix.
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 U.S. comes from higher commodity prices due to Russia’s invasion and continued disruptions from the coronavirus.
“In the immediate near term, it is critical to stem the increase in oil prices,” Zandi said last week, suggesting that Saudi Arabia, the United Arab Emirates and a nuclear deal with Iran could help to boost supplies and lower prices. Republican lawmakers have tried to shift more blame to Biden, saying he created a hostile environment for domestic oil producers, causing their output to stay below pre-pandemic levels.
Senate Republican leader Mitch McConnell mocked the gas tax holiday as an “ineffective stunt” in a Wednesday floor speech. “This ineffective administration’s big new idea is a silly proposal that senior members of their own party have already shot down well in advance,” he said.
House Speaker Nancy Pelosi and other congressional Democrats have long worried that suspending the gas tax would simply allow oil companies to reap additional profits with no guarantee the savings would be passed along to consumers at the pump.
Rep. Peter DeFazio, D-Ore., chairman of the House Transportation and Infrastructure Committee, said late Tuesday that he is urging colleagues to see the gas tax holiday “for what it is: a short-sighted proposal that relies on the cooperation of oil companies to pass on miniscule savings to consumers.”
But Dan Kildee, D-Mich., said he is a longtime supporter of a federal gas tax holiday.
“I admit to some frustration because I think it would have been more effective if we had done this a few months ago,” Kildee said. “But it’s never too late to do the right thing.”
One Democratic aide, who insisted on anonymity to frankly discuss the situation Wednesday, said it appears unlikely the proposal could pass the House without first clearing the evenly split Senate.
Administration officials said the $10 billion cost of the gas tax holiday would be paid for and the Highway Trust Fund kept whole, even though the gas taxes make up a substantial source of revenue for the fund. The officials did not specify any new revenue sources.
The president has also called on energy companies to accept lower profit margins to increase oil production and refining capacity for gasoline.
This has increased tensions with oil producers: Biden has judged the companies to be making “more money than God.” That kicked off a chain of events in which the head of Chevron, Michael Wirth, sent a letter to the White House saying that the administration “has largely sought to criticize, and at times vilify, our industry.”
Asked about the letter, Biden said of Wirth: “He’s mildly sensitive. I didn’t know they’d get their feelings hurt that quickly.”
Energy companies are scheduled to meet Thursday with Energy Secretary Jennifer Granholm to discuss ways to increase supply.
Associated Press writers Lisa Mascaro, Matthew Daly and Kevin Freking contributed to this report.
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