By Caitlin Reilly | Bloomberg
President Donald Trump voiced support for a gasoline tax holiday to counter rising prices at the pump, as the cost of oil soars while the war with Iran drags on.
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Trump told CBS News in a phone interview he would like to pause the federal 18.4 cents a gallon tax on gasoline “for a period of time,” though it’s unclear how much of the tax cut would reach consumers at the pump.
Also see: Trump says ceasefire is on ‘life support’ as Iran standoff deepens and strait remains closed
The average price for a gallon of regular gas in California was $6.16 on Monday, according to AAA fuel prices. The national price for regular gasoline reached $4.52 a gallon as of Sunday. The conflict has disrupted shipping through the Strait of Hormuz — through which about a fifth of the world’s oil and liquefied natural gas flowed before the war. Following the report, GOP Senator Josh Hawley of Missouri said Monday he would introduce legislation to suspend the gas tax.
If supporters are successful, it’s unclear whether the temporary tax cut would significantly lower prices at the pump. Of the more than 177 changes to state gas taxes between 2013 and 2021, on average only 18% of the change was passed through to customers, according to a study by the American Road and Transportation Builders Association, which supports gas taxes.
Compared to $1.54-per-gallon increase in the average national cost of gasoline since the war started, a pause wouldn’t be a “massive improvement,” said Patrick De Haan, head of petroleum analysis at GasBuddy. The move would also likely keep consumers from cutting back as gasoline supplies dwindle, he said.
“This is like putting lipstick on a pig,” De Haan said. “The real problem remains unresolved.”
Suspension of the tax could also have devastating consequences for the Highway Trust Fund, which pays for the construction and repair of interstate highways, roads and bridges, unless lawmakers find a way to backfill the loss. The fund draws more than 80% of its funding from the gas tax and a 24.4 cent per gallon levy on diesel, according to the Tax Policy Center.
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Georgia, Indiana and Utah have temporarily waived or lowered state gas taxes, in response to growing prices. Lawmakers in Alabama, New York, Pennsylvania and South Carolina have called for similar measures.
Indiana Governor Mike Braun announced an expansion of a gas tax holiday in his state last week
Democratic Senator Mark Kelly of Arizona and Representative Brendan Boyle of Pennsylvania have also been pressing for a temporary halt to the tax. Kelly introduced a bill in March to suspend the tax through October 1.
Boyle, the top-ranking Democrat on the House Budget Committee, proposed suspending the tax any time average gas prices rise above $4 a gallon. He would backfill the Highway Trust Fund by diverting $30 billion in “existing federal subsidies” for oil and gas companies to the fund, which sends grants to state and local governments to pay for construction and repairs.
Recent efforts to suspend the gas tax have received little support in Congress. Then-President Joe Biden proposed a three-month suspension in 2022 to help offset a surge in oil prices following Russia’s invasion of Ukraine. Five states, including New York and Connecticut, suspended their gas taxes at the time.
But congressional leadership from both parties swiftly rejected Biden’s proposal, questioning how much it would lower prices for consumers. Democratic leaders, whose party controlled both the House and Senate at the time, dismissed the idea. Senator Mitch McConnell of Kentucky, then the top-ranking Republican in the Senate, called it a “silly proposal.”
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