As Biden Weighs a Federal Gas Tax Holiday, Here’s What That Could Mean for Prices at the Pump
In a mostly symbolic move, President Joe Biden asked Congress to temporarily halt the collection of the federal gasoline tax, which has been blamed for hurting his party’s chances at the polls.
Biden Weighs A Federal Gas Tax Holiday
“By suspending the 18% federal gas tax for the next 90 days, we can bring down the price of gas and give families just a little bit of relief,” Biden said Wednesday at the White House.
He called on states to do the same because many of them have budget surpluses thanks to the federal pandemic stimulus, and he asked gas stations and refineries to pass on “every penny” of the savings to customers.
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“Your customers, the American people, they need relief now,” Biden said. “Bring down the price you are charging at the pump to reflect the cost you are paying for the product. Do it now, do it today.”
When Republican lawmakers criticized Biden for his handling of gas prices, the president responded by pinning the blame on the recent increase in Russia’s invasion of Ukraine.
“For all those Republicans in Congress criticizing me today for high gas prices in America, are you now saying we were wrong to support Ukraine?” he said. “Are you saying we were wrong to stand up to Putin? Are you saying that we would rather have lower gas prices in America and Putin’s iron fist in Europe?”
According to data from the auto club AAA compiled by Bloomberg, the average national price of regular unleaded has risen by about 38 percent since Russia’s invasion of Ukraine on February 24.
“I get the easy politics of the attack,” Biden added. “But the simple truth is gas prices are up almost $2 a gallon because of Vladimir Putin’s ruthless attack on Ukraine and we wouldn’t let him get away with it.”
After his talk, he did not take any questions.
Biden to call for 3-month suspension of gas and diesel taxes https://t.co/FBpAn9xNGb
— CNBC (@CNBC) June 22, 2022
The president is attempting to eliminate a political liability for him in the upcoming midterm elections by calling for lower gas prices. The millions of barrels of oil he ordered released from the Strategic Petroleum Reserve and the pressure he put on oil companies in the United States and abroad to increase production had little effect on gas prices.
However, his appeal to Congress on Wednesday was largely ineffective and demonstrated the limits of his authority. Biden’s falling approval ratings are unlikely to spur states to act if they haven’t already, and there is little appetite in Congress — even among Democrats — to pause gasoline tax collections.
“Bottom line is this is just kind of another rhetorical tool of the White House to sort of show that they’re doing everything they can on inflation,” Libby Cantrill, head of public policy at Pacific Investment Management Co., said Wednesday on Bloomberg Television.
Cutting the price of gasoline may encourage higher consumption, countering Biden’s efforts to reduce US reliance on fossil fuels, and he has previously advocated for measures to reduce US oil production before now urging its expansion.
Also, putting a hold on gas tax increases may end up making prices even higher than they already are. One of Biden’s advisors admitted that if it weren’t for the conflict in Ukraine, it wouldn’t even be on the table.
“This is not a proposal that you call for at all times,” Biden Adviser Gene Sperling said while speaking to Bloomberg Radio on Wednesday. “I think there’s been plenty of times when I would have said, hey, we don’t need to do that, but let’s think about what the moment is right now.”
The appeal is part of Biden’s ongoing rhetorical effort to attribute congressional inaction to Republicans as he raises the stakes before the midterm elections.
“For all those Republicans in Congress criticizing me today for high gas prices in America, are you now saying we were wrong to support Ukraine?” Biden asked. “Are you saying we were wrong to stand up to Putin? Are you saying that we would rather have lower gas prices in America and Putin’s iron fist in Europe?”
Current average US prices are around $5 per gallon, which is very close to a record high.
Taking action at the state level can highlight potential price increases. According to research conducted by the Wharton School at the University of Pennsylvania, after some states temporarily suspended their own fuel taxes, prices eventually rose above what they would have been without the temporary suspension.
In a Twitter thread, Harvard professor and former head of President Obama’s Council of Economic Advisers Jason Furman argued that the tax cut would primarily benefit businesses rather than individuals.
“The substantive case for the policy is weaker than ever,” Tobin Marcus, senior US policy strategist at Evercore ISI, wrote in a note Wednesday. “Subsidizing demand in a supply crunch would be counterproductive, the size of the tax cut relative to pump prices is marginal, and elevated refinery utilization means more of the benefit would be captured by producers rather than consumers.”
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