SouthernWorldwide.com – President Trump has proposed a temporary suspension of the federal gasoline tax as a measure to alleviate the burden of high fuel prices on American drivers. However, experts in tax and energy sectors suggest that the savings generated by this move would likely be modest.
U.S. drivers are currently facing the highest gasoline prices seen since 2022. The cost per gallon has surged by approximately $1.54 following joint attacks by the U.S. and Israel on Iran in late February. As of Monday, the national average price for a gallon of gas stood at $4.52, according to AAA.
“I think it’s a great idea,” President Trump stated to CBS News White House correspondent Nancy Cordes on Monday regarding the proposal to suspend the gas tax. He added, “We’re going to take off the gas tax for a period of time, and when gas goes down, we’ll let it phase back in.”
The federal government levies an 18.4-cent tax per gallon of gasoline and a 24.4-cent tax per gallon of diesel. These revenues are allocated to the Highway Trust Fund. Suspending this tax would reduce the current average price of regular gasoline to $4.34 per gallon and diesel to $5.39 per gallon.
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This price adjustment would effectively bring fuel costs back to levels seen in early May. However, even at those prices, gasoline was still approximately 46% more expensive than it was prior to the conflict with Iran. This highlights that recent price hikes have significantly outpaced the federal tax itself.
Andrew Lautz, director of tax policy at the Bipartisan Policy Center, commented on social media that the effectiveness of a gas tax suspension diminishes as prices rise. He explained that for a typical sedan, the increased cost of filling the tank since the Iran war began is between $18 and $25. A federal gas tax holiday would offer savings of up to $2 per fill-up.
Lautz has developed a tax calculator to help consumers estimate their potential fuel savings. For instance, an SUV owner in California could save between $2.36 and $3.09 per fill-up if the federal tax were suspended. Despite this, the driver would still be paying an additional $24 to $32 per tank compared to the period before the Iran war.
The implementation of a federal gas tax suspension faces significant hurdles. Since the fuel tax is established by federal law, any suspension would require approval from Congress. This presents a considerable challenge given the current partisan divisions in Washington and the approaching Midterm elections.
Furthermore, the proposal could encounter opposition due to its impact on the Highway Trust Fund. GasBuddy analyst Patrick De Haan estimated that suspending the federal gas tax would result in a loss of approximately $2.1 billion in revenue for the federal government each month.
In response to high fuel prices, several states have already opted to waive their own fuel taxes. States like Georgia, Indiana, and Utah have implemented such measures. Experts note that state-level fuel tax suspensions can offer more substantial relief than a federal suspension, as state fuel taxes vary widely, ranging from 15 cents to about 60 cents per gallon.
De Haan shared on social media that Indiana is experiencing significant drops in gas prices due to the state waiving its use tax and excise tax. This has resulted in discounts of nearly 60 cents per gallon, with prices falling below $4 at some stations in Indiana. This demonstrates the potential for state-level action to have a more pronounced impact.
Despite these examples, some state lawmakers have expressed reluctance to waive their gas taxes. Their concern centers on the potential depletion of funds necessary for maintaining and repairing roads, emphasizing the dual role of fuel taxes in both revenue generation and infrastructure funding.
