thebigp

Derek Saul--Forbes Staff--Jun 22, 2022,

President Joe Biden proposed Wednesday a federal gas tax holiday, as gas prices hover around record highs nationally, in a move that would instantly provide some relief to consumers—though some warn may not be the cure-all Biden seeks.

A man pumps gas in Pittsburgh last week.
ASSOCIATED PRESS
Biden called on Congress to pass a three-month federal gas tax holiday, which would suspend federal taxes on gas during the period.
This would make gas 18 cents cheaper per gallon and diesel 24 cents cheaper.
The proposal actually comes as prices are slightly decreasing: the national average price per gallon of gas is $4.955 Wednesday, according to the American Automobile Association, a slight drop from its peak of $5.016 last Tuesday but still a sharp increase from a year ago, when it was $3.069 average per gallon.
Despite the holiday likely providing some quick relief at the pump, it may contribute to further inflation by providing an indirect stimulus to consumers, Haverford College economist Carola Binder told NPR, arguing it may “lead to more inflationary pressures elsewhere.”
BIG NUMBER
$10 billion. That’s about how much the holiday would cost the federal government, Biden estimated Wednesday. Proceeds from the federal gas tax go to the Highway Trust Fund which finances federal infrastructure projects.
KEY BACKGROUND
Treasury Secretary Janet Yellen said during a Sunday interview with ABC News that a federal gas holiday is “certainly worth considering.” Sens. Maggie Hassan (D-N.H.) and Mark Kelly (D-Ari.) introduced a bill in February to suspend the federal gas tax for the remainder of the year. Biden said Monday he was considering supporting the holiday. Biden also called Wednesday for states to suspend their own gas taxes, which would provide further relief at the pump as state gas taxes can reach up to 57 cents per gallon. Oil prices slumped Wednesday morning following Biden’s holiday proposal, and futures of benchmark West Texas Intermediate fell 4.9% to $104.18, a 14.7% drop from its peak of $122.11 on June 8. Experts have suggested this drop may continue, and Moody’s Analytics chief economist Mark Zandi said Tuesday that gas and oil prices have already “peaked.”
WHAT TO WATCH FOR
If a gas tax suspension passes through Congress. Biden’s proposal isn’t even unanimously supported by Democrats, as House Majority Leader Steny Hoyer (D-Md.) told Politico Tuesday he’s not a “proponent” of the holiday, saying he doesn’t believe “it gives much relief.”
CHIEF CRITIC
Chevron CEO Mike Wirth criticized Biden in an open letter published Tuesday, saying he “seeks to vilify” the energy industry and bringing prices down “will require a change in approach for Biden.” Biden called Wirth “mildly sensitive” over his pointed criticism.