Fuel prices were extremely high in June 2022, reaching $5 for a gallon of gas or petrol, so the Biden administration was under pressure to address the hike. On June 22, 2022, U.S. President Joe Biden called on Congress to pass a gas tax holiday for three months.
A gas tax holiday is a suspension of the federal fuel tax in order to combat record high prices. According to Reuters, the federal fuel tax is 18.4 cents a gallon for gasoline and 24.4 cents a gallon for diesel, a level that hasn't changed since 1993. All revenue from the fuel tax has gone to the Highway Trust Fund, and is a big source of federal funding for roads, bridges, and highways.
A fact sheet released by the Biden administration said that such a suspension will give “Americans a little extra breathing room as they deal with the effects of Putin’s war in Ukraine.” Russia’s invasion of Ukraine has pushed other countries to no longer purchase oil from Russia, which has contributed to the price rise. However, experts point to a range of reasons for the price hikes, which include high demand, clogged supply chains, rising housing costs, and Covid-19 stimulus efforts.
Such a tax holiday can be imposed by the federal government, by states, or both. Biden urged states to suspend their own taxes as well, which often reach higher than the federal tax. New York suspended its 16-cent-per-gallon gas tax through the end of the year.
The White House also argued that the suspension of the fuel tax would not have an adverse impact on the Highway Trust Fund: “With our deficit already down by a historic $1.6 trillion this year, the President believes that we can afford to suspend the gas tax to help consumers while using other revenues to make the Highway Trust Fund whole for the roughly $10 billion cost.”
Biden said: "I fully understand that a gas tax holiday alone is not going to fix the problem, but it will provide families some immediate relief, just a little bit of breathing room as we continue working to bring down prices for the long haul." He also criticized oil and gas companies, calling on them to increase their production output and refining capacity, and called on gas station owners to lower their prices.
But many argue this gas tax holiday proposal will be “dead on arrival” in Congress, because Biden needs not only all Democratic senators to advance the legislation (from his own party), but at least 10 Republicans. Even Democrats are skeptical of the proposal. U.S. House Speaker Nancy Pelosi said in March that oil companies would simply raise gas prices and reap profits, and she recently just stopped short of committing to the proposal, saying she would “see where the consensus lies.”
U.S. Sen. Tom Carper from Delaware tweeted "suspending the primary way that we pay for infrastructure projects on our roads is a shortsighted and inefficient way to provide relief.”
Republicans widely oppose the gas tax suspension proposal and have accused the Biden administration of undermining the energy industry.
Economists also say the idea is wasteful, providing only a small and temporary relief for consumers while sacrificing government revenue. Many believe that the chances of this gas tax holiday actually passing in Congress is low, but we will update this post once we know more.