Who gains from pausing the gas tax? Probably not drivers — or Biden
Even if Congress was in a mood to cooperate with Biden’s plan, most studies show that only a small portion of the savings from halting the tax would make its way to consumers.
Joe Biden speaks at the White House.
President Joe Biden also asked states to either halt their own fuel taxes or find other ways to help consumers. | Drew Angerer/Getty Images
By Tanya Snyder
06/22/2022 06:00 PM EDT
President Joe Biden’s call for a gasoline tax holiday took immediate flack Wednesday from Republicans, key congressional Democrats and even some industries that favor lower fuel costs.
But what would it actually do?
The hard realities: Even if Congress was in a mood to cooperate with Biden’s plan, most studies show that only a small portion of the savings from halting the tax would make its way to consumers. Meanwhile, the tax pause would take money away from Biden’s signature infrastructure law — and it probably wouldn’t offer his party much help with voters in November. It does, however, give Biden some cover to appear as if he’s at least trying to tackle an issue that’s hitting Americans in the pocketbook.
Here are some details you need to know about Biden’s proposal, which is unlikely to become reality:
What exactly has Biden proposed?
The White House wants Congress to suspend the 18.4 cents per gallon federal gasoline tax and 24.4 cents per gallon federal diesel tax for the next three months, “to provide direct relief to American consumers who have been hit with Putin’s Price Hike.” Biden also asked states to either halt their own fuel taxes or find other ways to help consumers. For example, California has considered $400 direct payments to vehicle owners. Chicago has been sending drivers $150 gas cards and $50 transit vouchers.
Biden proposes suspending the federal gas tax for three months
What are the chances of a gas tax holiday happening?
Slim.
Congress creates the laws that raise — and spend — money. But the lawmakers that Biden would need to enact his proposed pause in gasoline tax collections are lukewarm at best. A handful of Democrats are on record as supporting the idea, but many of them dislike Biden’s proposal — because it doesn’t go far enough.
Critics of a tax holiday include House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer, who have said a pause would bring only meager savings for consumers but could enrich oil companies that are already earning record profits. Instead, they prefer legislation that would penalize price gouging by oil companies (who deny gouging).
Would the tax holiday save me money?
Probably not as much as you think.
If the 18.4 cents-per-gallon tax were paused as Biden has asked, consumers would save about $3 on the $75 it costs to fill up a standard sedan or crossover, assuming 15 gallons purchased at $4.98 a gallon.
And motorists may not even see that much. One reason Democratic leaders have opposed a gas tax holiday is skepticism that oil companies would pass along the savings at the pump, as opposed to just pocketing the extra money.
State-level gas tax holidays have yielded a mixed picture.
White House
Biden announces a likely doomed gas tax holiday
By Sarah Ferris and Adam Cancryn
The University of Pennsylvania’s Wharton School examined the impacts in the states that have paused their gas taxes in the last few months and found that in Maryland, 72 percent of tax savings were passed onto consumers, compared with 58 percent to 65 percent in Georgia and 71 percent to 87 percent in Connecticut. Still, the Wharton researchers found that “these price reductions were often not sustained during the entire holiday.”
And the dollar amount Wharton put on the savings from a potential gas tax holiday at the federal level was meager. In March, they found that suspending the federal gas tax through December would save the average person between $16 and $47 on gas while lowering federal tax revenue by about $20 billion.
Drivers would easily forget the small savings in the gas tax amid daily fluctuations in fuel prices, which can “drop or surge by 10 to 20 cents a gallon in a single [trading] session,” said Tom Kloza, global head of energy analysis at the Oil Price Information Service. It could even backfire: “The problem with an 18 cents a gallon gas tax holiday is that it juices up demand when the supply-and-demand balance is already tilted toward tight supply.”
Kloza suggested that limiting U.S. fuel exports — thus keeping more of the gasoline supply at home — could be a more effective way of reining in domestic prices.
How would the tax vacation affect federal infrastructure spending?
In short, the government would have less money for projects such as highways, transit, bridges and related programs involving the environment and racial equity — including Biden’s prized $1 trillion-plus infrastructure law.
The federal government deposits taxes on gasoline and diesel fuel into the Highway Trust Fund, which it uses to pay for infrastructure projects across the country. According to the Congressional Budget Office, tax revenues into the fund in the current fiscal year should amount to about $44 billion, assuming the status quo.
https://www.politico.com/news/2022/...as-tax-probably-not-drivers-or-biden-00041536
Even if Congress was in a mood to cooperate with Biden’s plan, most studies show that only a small portion of the savings from halting the tax would make its way to consumers.
Joe Biden speaks at the White House.
President Joe Biden also asked states to either halt their own fuel taxes or find other ways to help consumers. | Drew Angerer/Getty Images
By Tanya Snyder
06/22/2022 06:00 PM EDT
President Joe Biden’s call for a gasoline tax holiday took immediate flack Wednesday from Republicans, key congressional Democrats and even some industries that favor lower fuel costs.
But what would it actually do?
The hard realities: Even if Congress was in a mood to cooperate with Biden’s plan, most studies show that only a small portion of the savings from halting the tax would make its way to consumers. Meanwhile, the tax pause would take money away from Biden’s signature infrastructure law — and it probably wouldn’t offer his party much help with voters in November. It does, however, give Biden some cover to appear as if he’s at least trying to tackle an issue that’s hitting Americans in the pocketbook.
Here are some details you need to know about Biden’s proposal, which is unlikely to become reality:
What exactly has Biden proposed?
The White House wants Congress to suspend the 18.4 cents per gallon federal gasoline tax and 24.4 cents per gallon federal diesel tax for the next three months, “to provide direct relief to American consumers who have been hit with Putin’s Price Hike.” Biden also asked states to either halt their own fuel taxes or find other ways to help consumers. For example, California has considered $400 direct payments to vehicle owners. Chicago has been sending drivers $150 gas cards and $50 transit vouchers.
Biden proposes suspending the federal gas tax for three months
What are the chances of a gas tax holiday happening?
Slim.
Congress creates the laws that raise — and spend — money. But the lawmakers that Biden would need to enact his proposed pause in gasoline tax collections are lukewarm at best. A handful of Democrats are on record as supporting the idea, but many of them dislike Biden’s proposal — because it doesn’t go far enough.
Critics of a tax holiday include House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer, who have said a pause would bring only meager savings for consumers but could enrich oil companies that are already earning record profits. Instead, they prefer legislation that would penalize price gouging by oil companies (who deny gouging).
Would the tax holiday save me money?
Probably not as much as you think.
If the 18.4 cents-per-gallon tax were paused as Biden has asked, consumers would save about $3 on the $75 it costs to fill up a standard sedan or crossover, assuming 15 gallons purchased at $4.98 a gallon.
And motorists may not even see that much. One reason Democratic leaders have opposed a gas tax holiday is skepticism that oil companies would pass along the savings at the pump, as opposed to just pocketing the extra money.
State-level gas tax holidays have yielded a mixed picture.
White House
Biden announces a likely doomed gas tax holiday
By Sarah Ferris and Adam Cancryn
The University of Pennsylvania’s Wharton School examined the impacts in the states that have paused their gas taxes in the last few months and found that in Maryland, 72 percent of tax savings were passed onto consumers, compared with 58 percent to 65 percent in Georgia and 71 percent to 87 percent in Connecticut. Still, the Wharton researchers found that “these price reductions were often not sustained during the entire holiday.”
And the dollar amount Wharton put on the savings from a potential gas tax holiday at the federal level was meager. In March, they found that suspending the federal gas tax through December would save the average person between $16 and $47 on gas while lowering federal tax revenue by about $20 billion.
Drivers would easily forget the small savings in the gas tax amid daily fluctuations in fuel prices, which can “drop or surge by 10 to 20 cents a gallon in a single [trading] session,” said Tom Kloza, global head of energy analysis at the Oil Price Information Service. It could even backfire: “The problem with an 18 cents a gallon gas tax holiday is that it juices up demand when the supply-and-demand balance is already tilted toward tight supply.”
Kloza suggested that limiting U.S. fuel exports — thus keeping more of the gasoline supply at home — could be a more effective way of reining in domestic prices.
How would the tax vacation affect federal infrastructure spending?
In short, the government would have less money for projects such as highways, transit, bridges and related programs involving the environment and racial equity — including Biden’s prized $1 trillion-plus infrastructure law.
The federal government deposits taxes on gasoline and diesel fuel into the Highway Trust Fund, which it uses to pay for infrastructure projects across the country. According to the Congressional Budget Office, tax revenues into the fund in the current fiscal year should amount to about $44 billion, assuming the status quo.
https://www.politico.com/news/2022/...as-tax-probably-not-drivers-or-biden-00041536
