WASHINGTON – President Biden called on Congress on Wednesday to temporarily suspend the federal gas tax, in an effort to give Americans “some room to breathe” in the face of rising fuel prices, though economists and lawmakers on both sides expressed skepticism that the measure would. a lot of difference.
During an afternoon speech, Biden called on Congress to raise federal taxes — about 18 cents a gallon of gas and 24 cents a gallon of diesel — until the end of September, shortly before the fall midterm elections. The president also called on states to suspend their own gas taxes, in hopes of alleviating the economic pain that has contributed to a decline in popularity.
“I fully understand that the gas tax party alone will not solve the problem,” Biden said. “But it will provide immediate relief for families. Just a little margin as we continue to work to reduce prices in the long run.”
However, the White House is facing a tough battle to get Congress to approve the holidays. While the administration and some congressional Democrats have been discussing the suspension for months, Republicans have strongly opposed it, accusing the administration of undermining the energy industry. Even members of Mr Biden’s own party, including President Nancy Pelosi, have expressed concern that companies are absorbing much of the savings, leaving little for consumers.
Kentucky Sen. Mitch McConnell, the Republican leader, quickly rejected the president’s call to suspend the tax. “The great new idea of this administration is a silly proposal that high-level members of their own party have already rejected long in advance,” he said.
Mr Biden said he wanted to ensure that consumers would benefit from the federal tax moratorium. The administration estimates that the combination of several possible steps – the suspension of the tax, the cessation of state gas taxes and an increase in the refining capacity of oil companies – would reduce gas prices by at least $ 1 a day. gallon.
But critics have questioned the effectiveness of the gas tax holiday, dismissing the idea as little more than a desperate attempt by the White House and vulnerable Democrats to show the party is paying attention to the financial pain of the North. -americans.
Economists and some members of Congress have criticized the idea of suspending the federal gasoline tax as an unnecessary step for the government, given the revenue that would be sacrificed in an attempt to provide only a slight dose of relief to consumers. Its impact on them would be quite limited: the tax is now such a small portion of the price at the pump, which accounts for less than 5 percent of the total cost, that Americans may not even notice its absence.
“I don’t think it moves the needle in people’s willingness to buy more, and it doesn’t save them a lot of money either,” said Garrett Golding, a business economist at the Federal Reserve Bank of Dallas. “Looks like something is being done to reduce gas prices, but not much.”
Read more about oil and gas prices
This year, oil and refined fuel prices rose to the highest levels in 14 years due to Russia’s invasion of Ukraine, sanctions imposed on President Vladimir V. Putin, and a rise in usage. of energy as the United States recovers from the coronavirus pandemic. The White House has increasingly tried to blame the rising prices on Russia, a strategy that has done little to calm anxiety among Americans. The national average for regular gasoline was $ 4.95 per gallon on Wednesday, according to AAA, after hitting $ 5 this month.
Biden has also released strategic oil reserves and suspended a ban on summer sales of gasoline blends with more ethanol in an attempt to moderate rising prices, frustrating climate activists still unhappy over collapse of spending package social and climate of the president.
Congress has not raised the federal gas tax since 1993. But it has never raised it either. Taxes on gasoline and diesel now provide most of the federal funding used to build and maintain highways ($ 36.5 billion in 2019), although spending has exceeded dedicated revenue in recent years.
This means that Mr Biden’s latest step in addressing a political vulnerability could undermine funding for one of the main legislative achievements during his tenure in office: infrastructure investments.
“I haven’t been to relieve the gas tax because of the infrastructure implications,” West Virginia Republican Sen. Shelley Moore Capito said Wednesday.
But one of the most frequently asked questions I hear from voters, he added, is: What about my gas?
“I think it’s a temporary solution,” Ms. I understand. “But yes, people were saying, ‘Do something.'”
Senator Rick Scott of Florida, chairman of the Senate Republican campaign arm, questioned where the federal government would find the revenue normally generated from the gas tax that supports road construction, bridges and other infrastructure projects in its state.
“What expenses are we going to reduce?” he said, adding that the proposed tax suspension showed that “Democrats know they have deep problems.”
Mr Biden tried to allay those concerns on Tuesday.
“Look, it will have some impact, but it will not have an impact on major road construction and major repairs,” he told reporters, adding that the administration had a lot of capacity to maintain the roads.
The tax suspension would cost about $ 10 billion. Senior administration officials said Mr Biden would ask Congress to dive into other jars of money to fill the loss.
But as global oil demand and a fractured market have pushed up prices, experts have questioned the extent to which consumers would benefit from a tax cut on gasoline.
“Whatever you think of the merits of a gasoline tax party in February, it’s a worse idea now,” Jason Barman, chairman of President Barack Obama’s Board of Economic Advisers, posted on Twitter, arguing that the oil industry was likely. to pocket most of the savings.
As an example, even if all the benefits were passed on to consumers, the owner of a Ford F-150 who gets 20 miles per gallon driving a thousand miles a month would save about $ 9 if the federal gas tax were suspended. .
Progressives and energy experts have advocated for alternative ways to mitigate gas price shocks or divert some of the profits from oil companies and refineries while supply has remained tight. In her 2008 presidential campaign, when inflation-adjusted prices approached an even higher point, Hillary Clinton proposed combining a lower gasoline tax with a tax on corporate profits. oil companies.
But among the limited tools the federal government has to cut gas prices, the tax hike could resonate more among Americans.
“That’s what voters care about. That’s what politicians care about,” said Erich Muehlegger, an associate professor of economics at the University of California, Davis. “Things like an extraordinary tax on oil companies can be politically attractive, but we don’t necessarily think they have an immediate impact on gas prices.”
Dr.’s research Muehlegger has found that drivers adjust their consumption more in response to changes in gas prices than to changes of a similar magnitude based on the market, in part because of the media attention generated by these changes.
New Hampshire Democrat Sen. Maggie Hassan, who is facing a tough re-election bid, said Biden should go further to relieve voters. In a statement, the White House said it should move forward with a gas tax suspension for the rest of the year, instead of just three months.
“I will continue to pressure my colleagues in Congress to suspend the gas tax, and I continue to urge the President to take executive action to immediately reduce the energy costs of families,” he said.
States have more power to cut gas prices, as their taxes and fees have been steadily rising, to an average of about 38 cents per gallon. So far, three states have approved and completed gas tax holidays: Maryland, Georgia and Connecticut. New York suspended its tax earlier this month, and Florida will raise its tax for October.
However, gasoline producers and retailers are likely to reap some of the benefits. An analysis by economists with Penn Wharton’s budget model from the University of Pennsylvania showed that in states where the gas price holidays have ended, between 58 and 87 percent of the value of the suspended gas tax it was passed on to consumers, and suppliers have absorbed the rest. A federal suspension would be much smaller that could be overshadowed by the volatile underlying price of oil, which has fallen over the past week.
Mr Biden also plans to target oil companies on Wednesday, demanding that they expand refining capacity to reduce costs at the pump, just days after accusing executives of taking advantage and “worsening the pain” of consumers. While refineries have struggled to keep up with growing demand, refineries have added less than 1% to their capacity worldwide.
Emily Cochrane, Catie Edmondson and Stephanie Lai contributed to the report.