President Biden will on Wednesday call on Congress to suspend the federal gas tax for three months and ask states to suspend their own gas taxes or provide commensurate relief to consumers, according to the White House.
The federal government charges an 18.4-cent tax per gallon of gasoline and a 24.4-cent tax per gallon of diesel. Suspending the tax for three months – through the end of September, as Biden will call for – will cost about $10 billion, according to the White House.
Asked if Biden believes Congress can somehow mandate that oil companies pass on those savings, in full, to consumers, a senior administration official did not directly say, but noted there is “some evidence that state tax suspensions, in particular, do get passed through to consumers.”
The official, in a Tuesday evening call with reporters, said “the president is absolutely calling on companies to make sure that those savings are passed through to consumers.”
The administration is also putting public pressure on oil companies to help Americans at a time of financial need.
“Companies, of course, are beholden to their shareholders, but they really need to be beholden and conscious of customers, and their fellow neighbors, and their fellow citizens, just like this administration’s doing,” another senior administration official told reporters. “And we hope that that’s the spirit that CEOs of these companies will take.”
U.S. Energy Secretary Jennifer Granholm is scheduled to meet with oil refining executives Thursday.
On Wednesday, Biden will also call on state and local governments to provide “relief” to Americans by suspending their state gas taxes or provide other remedies, like delaying planned tax and fee increases, or even consumer rebates or relief payments, according to the White House. An official said Biden wants states to “match” what the federal government would be doing in the short term.
State gas taxes average about 31 cents per gallon of gasoline, according to the U.S. Energy Information Administration.
A federal gas tax holiday “isn’t going to solve the whole problem,” the official said. “It is something that can be done to take a real step to relieve some of that pain at the pump. And we see it as part of a suite of policies that are designed to provide that relief, including policies that focus on the supply side.”
I asked the official why Biden wants the federal tax suspended for three months specifically, and the official said that ahead of the summer the president wanted to balance the need of “the unique moment that we’re in” – particularly during the summer driving season – with the fact that the tax provides important revenue for the government to pay for highways and other transportation projects.
“The purpose of this suspension,” the official said, “is really to address the unique moment that we’re in, and with a particular focus on the summer driving season and the pain that families are feeling at the pump right now, while recognizing that on a longer-term basis, the gas tax is an important source of revenue for federal infrastructure.”
The gas tax revenue goes to the federal government’s Highway Trust Fund, which provides for much of the government’s spending on highways and mass transit. Biden believes Congress can fill in that roughly $10 billion gap with “other revenues,” an official said.
I asked if that money would come from the $1.2 trillion infrastructure law, to which Biden signaled openness today. The official wouldn’t say, but did note that there were proposals in Congress that do cover the revenue shortfall.
The official told me that the administration was “encouraged by the fact” that members of the House and Senate have already made similar proposals to what Biden will call for on Wednesday, but suggested the White House had yet to engage with Congress on this topic — saying “we expect to” engage with Congress.
Also, the official said that all of the policies Biden is proposing could save consumers up to $1 per gallon or more — although when the official broke down that number, the goal sounded quite aspirational and unlikely:
The federal gas tax is about 18 cents. State gas taxes average about 31 cents. If retailers promptly pass through recent reductions in oil prices to consumers, that could add 25 more cents in savings If refiners use their profits to expand capacity, that could lead to up to 66 cents in savings per gallon
“President Biden understands that a gas tax holiday alone will not, on its own, relieve the run up in costs that we’ve seen,” the White House said in a statement. “But the President believes that at this unique moment when the war in Ukraine is imposing costs on American families, Congress should do what it can to provide working families breathing room.”