President Joe Biden plans to call on Congress to suspend federal gasoline and diesel taxes for three months to ease financial pressures from high gas prices – in an election year.
The president will also ask states to suspend their own gas taxes or provide similar relief, according to administration officials who previewed his proposals.
The proposal involves the 18.4 cents-a-gallon federal tax on gas and the 24.4 centsa-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.
But economists and lawmakers from both parties view the idea 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.
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 threaten Democrats in the House and Senate in the 2022 November elections.
Thus far, 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.
But the president can do little to fix prices are set by global markets, profit-driven companies, consumer demand with the underlying problem a shortage of oil and refineries that produce gas.
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 prepandemic levels.
Senate Republican leader Mitch McConnell mocked the idea of a gas tax holiday. “They’ve spent an entire year waging a holy war on affordable American energy, and now they want to use a pile of taxpayers’ money to hide the consequences.”
Democratic House Speaker Nancy Pelosi has previously expressed doubts about the value of suspending the federal gas tax.
Administration officials said the $10 billion cost of the gas tax holiday would be paid for, but officials did not specify any new revenue sources.
The president also called on energy companies to accept lower profit margins to increase oil production and refining capacity for gasoline, increasing tensions with oil producers.
Energy companies are scheduled to meet with Energy Secretary Jennifer Granholm to discuss ways to increase supply.