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 3. TaxWatch


TAXWATCH




WOULD A FEDERAL GAS TAX HOLIDAY MEAN LOWER PRICES AT THE PUMP? DON’T BET ON IT,
CRITICS SAY

Published: Feb. 15, 2022 at 1:56 p.m. ET
By

ANDREW KESHNER

  comments


SOME DEMOCRATIC LAWMAKERS AND THE WHITE HOUSE ARE REPORTEDLY CONSIDERING THE
IDEA OF A PAUSE ON THE FEDERAL GAS TAX

PRICES AT A LOS ANGELES GAS STATION ON FEB. 8, 2022. GALLON PRICES IN LOS
ANGELES COUNTY REACHED NEW RECORD HIGHS RECENTLY. SOME LAWMAKERS ARE REPORTEDLY
CONSIDERING A FEDERAL GAS TAX PAUSE TO HELP CONSUMERS. HOW MUCH WOULD IT HELP?

Photo by Mario Tama/Getty Images
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A proposal to pause the federal gas tax could be accelerating as the Biden
administration and Democratic lawmakers consider how they can help cut household
costs in a time of high inflation.

Days after several Democratic senators announced a bill that would put the
18.4-cent gas tax on hiatus during 2022, lawmakers were reportedly giving the
idea some thought at a Tuesday lunch, the Washington Post reported.

But critics say they should be slamming the brakes instead. They doubt a tax
holiday would translate into pump price relief for consumers while
Ukraine-Russia tensions continue, the global supply chain remains snarled, and
spring’s warmer weather will keep gas demand high in America.


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“It’s just a horrible idea on every front,” said Marc Goldwein, senior policy
director at the Committee for a Responsible Federal Budget, a non-partisan
centrist think tank.

That echoes a barb from former Treasury Secretary Larry Summers, who was quoted
in the Washington Post saying the idea of a gas tax holiday was “short-sighted,
ineffective, goofy and gimmicky.”

The national average for gallon of gas was $3.49 as of Tuesday, according to
AAA. That’s up more than a dime from a month ago and it’s a one-dollar increase
from the $2.50 average price at the same time last year.



The overall cost of living rose 0.6% in January compared to December, marking a
7.5% year-over-year rise, according to the latest Consumer Price Index data.
There was a 40% year-over-year price increase for gasoline, not seasonally
adjusted, the Bureau of Labor Statistics data showed.

WHAT IS THE FEDERAL GAS TAX?

The federal gas tax is an 18.4-cent per gallon levy that’s layered into the
overall cost of a gallon of gas. The money from the federal tax goes to a trust
fund for highways that could be running out of money by 2027 by some estimates.
Congress hasn’t raised the tax rate since 1993. States have their own gas taxes,
which help with state road costs. The Highway Trust Fund builds and maintains
highways and bridges and also funds capital expenditures for public transit.

Florida Gov. Ron DeSantis, a Republican, has proposed a five-month pause on the
state’s 25-cent gas taxes. State lawmakers sound skeptical, according to local
reporting from WFSU.

The federal bill at issue, the Gas Prices Relief Act, would suspend the gas tax
until Jan. 1, 2023 and authorize general fund transfers to keep the Highway
Trust Fund solvent.



The Treasury Department would ensure “oil and gas companies pass along the
savings at the pump to consumers,” according to an announcement of the bill
co-authored by Sens. Maggie Hassan of New Hampshire and Mark Kelly of Arizona.


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“People are feeling a real pinch on everyday goods, and we must do more to help
address rising costs, particularly the price of gas,” Hassan said in a
statement. “We need to continue to think creatively about how we can find new
ways to bring down costs, and this bill would do exactly that, making a tangible
difference for workers and families.” 

Hassan’s office did not immediately respond to a request for comment.

Federal and state taxes accounted for 18% of the cost for a gallon of gas in
2019, according to AAA data sourced from the U.S. Energy Information
Administration. The top price component was crude oil, which contributed to 54%
of the cost of a gallon in 2019.

“Over the past week and a half, we’ve seen oil prices rise sharply in response
to tension in Russia and Ukraine,” said AAA spokesman Devin Gladden. “Right now,
the main driver for gas price increases is the high cost of crude and the rapid
rise in the cost of crude.”

On Tuesday, stocks jumped higher on the hope that the Russia-Ukraine stare down
could end peacefully. The price on West Texas Intermediate crude for March
delivery pulled back to under $91.

‘IT’S HARD TO SEE THE LOGIC TO THIS GAS TAX POLICY’

Gladden noted he wasn’t commenting on the specifics of any legislative
proposals, but said “offering a holiday would offer no vacation from higher oil
prices. It’s a solution that would not fit the problem at hand.” The timing
could wash out any potential savings too, because increased travel during spring
and summer traditionally send gas prices higher, Gladden noted.

Any sort of break on gas taxes is “not going to cause as big a price reduction
as politicians hope,” he said.

It’s unclear what the future is for any federal gas tax halt, but the Biden
administration has made other efforts to reduce pump prices, including the
release of 50 million barrels of oil from the country’s strategic petroleum
reserve.

That was a “very reasonable approach,” in Goldwein’s eyes. But he can’t say the
same about a pause on the 18.4-cent federal gas tax. The pause would cost the
government $20 billion in missed revenue, according to his organization’s
estimates.

Drivers would “get a fraction of that relief” because gas retailers might pass
along less than an 18.4-cent price cut to consumers, and it would ultimately
feed into inflation, Goldwein said.

The money potentially saved on gas might free up cash that contributes to higher
prices elsewhere, he noted. A gas tax pause doesn’t fit with goals to strengthen
infrastructure or tackle climate change, he said. “It hard to see the logic to
this gas tax policy,” he said.



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DISNEY TO DEVELOP RESIDENTIAL COMMUNITIES

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THE TRADE DESK STOCK HEADS HIGHER AFTER UPBEAT EARNINGS, OUTLOOK


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