President Biden on Wednesday will call on Congress to suspend the federal gas tax for three months as Americans contend with record-high gas prices.
The gas tax holiday would cost roughly $10 billion, according to a fact sheet released by the White House. However, Biden will ask Congress to enact the suspension without harming the Highway Trust Fund, which receives funds from the tax revenue.
The president will suggest Congress use other revenues to make up for the loss, the New York Times reported.
"Look, it will have some impact, but it's not going to have an impact on major road construction and major repairs," Biden said earlier this week.
The president also plans to urge states, oil companies and retailers to pause gas taxes after the national average price for gas hit $5 per gallon for the first time ever earlier this month.
The federal gas tax was last altered in 1993 under the Clinton administration when it was raised to 18.4 cents per gallon of gasoline purchased at pumps. The diesel tax was raised to 24.4 cents per gallon at that time as well.
Some have argued that a gas-tax pause will be inflationary as residual savings will cause more spending and thus a rise in prices.
The nonpartisan Committee for a Responsible Federal Budget has warned that a 10-month gas tax holiday could increase demand for gas and other goods and services “at a time when the economy has little capacity to absorb it.”
“The result could be even higher rates of inflation in 2023,” the committee warned.
Senator John Kennedy (R., La.) called the idea of a gas tax suspension a "gimmick…that's not going to make any difference" and said that the Senate Republican Conference had dismissed the idea. Senator James Lankford (R., Okla.) has warned that "a gas tax holiday cannot get through the Senate."
Even former President Barack Obama called a gas tax holiday a “gimmick” while on the campaign trail in 2008, saying the tax suspension saves Americans half a tank of gas over an entire summer so that lawmakers could “say they did something.”
The federal gas tax represents less than 5 percent of the total cost at the pump, according to the New York Times.
"I don't think it moves the needle on people's willingness to buy more, and it doesn't exactly save them a whole lot of money, either," Garrett Golding, a business economist at the Federal Reserve Bank of Dallas, told the paper. "It sounds like something is being done to lower gas prices, but there's not a whole lot of there there."
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