President Biden on Wednesday will urge Congress to suspend federal gas and diesel taxes for three months, a move experts say does not guarantee meaningful benefit for consumers or the trucking sector.
In a fact sheet posted by the White House, the administration acknowledged that the federal 18-cent-per-gallon tax on gasoline and the 24-cent-per-gallon tax on diesel are “critical” to funding highway maintenance and repair through the Highway Trust Fund (HTF).
“But in this unique moment, with gas prices near $5 a gallon on average across the country, President Biden is calling on Congress to suspend the gas tax for three months — until the end of September — to give Americans a little extra breathing room as they deal with the effects of Putin’s war in Ukraine,” the White House noted.
In remarks planned for later in the day, Biden is also expected to encourage states to take similar action by either suspending their own gas taxes or putting in place other short-term inflation-relief measures.
To ensure the temporary tax holiday does not affect the HTF, Biden urged Congress to include in the legislation a provision requiring money to be transferred from the Treasury Department’s general fund into the HTF to cover the roughly $10 billion cost of the proposal — a provision consistent with federal gas tax holiday bills introduced in Congress earlier this year.
Congress has transferred funds from the general fund to the HTF three times since 2008 to ensure the fund remained solvent, the House bill points out.
However, “all this does is make the trust fund even more dependent on the general fund [for maintaining roads and bridges], as opposed to moving to user fees,” Jeff Davis, senior fellow with the Eno Center for Transportation, told FreightWaves.
Davis said legislation can be drawn up quickly and would likely pass the House easily, but could have a more difficult time in the Senate.
Trucking slams proposal
The American Trucking Associations said it “strongly opposes” a fuel tax holiday, calling it a “gimmick” that does not effectively address high energy prices or inflation.
“Here are three immediate things this administration and Congress can do that will actually make a difference,” said ATA President and CEO Chris Spear.
“Make America energy independent — stop kissing the ring of Saudi Arabia. Renew trade agreements with the European Union and Asian Pacific nations in order to export more American oil and natural gas. And balance the budget — stop wasting hard-earned taxpayer dollars on senseless programs that drive up inflation and runaway deficits.”
A tax holiday on fuel could have ramifications within the supply chain as well, according to Bobby Bui, a specialist in oil and gas excise and sales taxes at Thomson Reuters.
Temporarily halting federal diesel and gasoline taxes would “disrupt the entire fuel industry, as everyone within the supply chain, from refinery to retail, will need to account for the suspension of any tax within their relevant finance, accounting and point-of-sale systems,” Bui warned.
Benefits in question
David Brunori, a senior director at tax consultancy RSM US and a visiting professor of public policy at George Mason University, said most public finance experts frown on tax holidays at both the state and federal level and that they are rarely ever viewed as good tax policy.
“Politically it’s a winner in the sense it shows that the government is doing something, and it could provide temporary relief to some extent,” Brunori told FreightWaves. “But there’s no guarantee that all the savings would be fully passed down and theoretically it would cause people to drive more, which would then increase the price of gas as demand goes up.
“So you may save a few pennies, but you end up damaging the trust fund. The gas tax is the one tax that most people think is actually a good tax, because it’s tied to the use of the roads.”