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Biden Wants Congress to Pause Federal Gas Tax for 3 Months: Why It Could Make Fuel Problems Even Worse

A Shell gas station advertises its gas prices June 17, 2022, in Miami, Fla. President Biden will ask Congress to help Americans's pocketbooks with a three-month gas "tax holiday." (AP Photos/Marta Lavandier,Susan Walsh)

President Joe Biden wants Congress to suspend all federal gas taxes to help ease Americans' pocketbook pain due to the record-high gas prices.

The president is set to make the announcement Wednesday, but will it make much difference?

The Wall Street Journal cites senior administration officials who say Biden will call on Congress to suspend federal gas taxes, including the 18.4 cents a gallon tax on regular unleaded gasoline and 24.4 cents a gallon on diesel.

He will also call on states to suspend their own taxes or provide similar relief, according to the White House.

The proposed "tax holiday" would last for three months through September.

Gas prices right now average about $5 a gallon nationwide. Before this year, the highest average price for gas recorded by the American Automobile Association was $4.11 a gallon in July 2008. 

A 'Gimmick'

Lawmakers on both sides of the aisle have shown a lack of support for the move. Both House Speaker Nancy Pelosi and Senate Republican Leader Mitch McConnell have previously voiced skepticism about the benefits of suspending the gas tax.

The Highway Trust Fund, which finances most federal government spending for highways and mass transit, would lose an estimated $10 billion if Congress approved the tax relief. According to the Tax Policy Center, revenues for the trust fund come from transportation-related taxes, primarily federal taxes on gasoline and diesel fuel. 

Former President Barack Obama called the idea a "gimmick" during his presidential campaign in 2008. He argued it just allowed politicians to say that they "did something."

Creating More Demand Without Increasing Supply

The possibility of a gas tax holiday has drawn criticism from economists and the business community for not fixing the underlying supply challenges.

In an address Tuesday at the Economic Club of New York, a non-profit, non-partisan business group, Target CEO Brian Cornell called the gas tax holiday a temporary "mini-stimulus" that does nothing to fundamentally change the supply and demand curve for fuel and transportation.

"We have a classic supply-and-demand challenge," Cornell told the audience. "In all due respect, the gas holiday is only going to fuel demand. It's doing nothing to increase the supply."

Could Actually Cause More Inflation

Carola Binder, an associate professor of economics at Haverford College, told NPR that if the tax holiday encourages more spending, it could actually hurt the economy.  

"By making gas cheaper that allows people to buy more of it," Binder said. "It's giving them a tax cut and that gives them more to spend elsewhere. So that is going to lead to more inflationary pressures elsewhere."

Ultimately, Is It a 'War on Fossil Fuel'?

Meanwhile, the president claims he's trying to help American families by bringing down gas prices. But some argue that's really not what he's doing. 

“I’m using every lever available to me to bring down prices for the American people,” Biden said on June 17. “But the critical point is that these actions are part of our transition to a clean and secure and long-term energy future.”

At the outset of his presidency, Biden vowed to make the United States a leader again in slashing fossil fuel emissions.  

Last month, Biden came under heavy fire from critics when he appeared to praise the painfully high gas prices that are hurting American families, calling it part of an "incredible transition" away from fossil fuels.

During his visit to Japan, Biden spoke at a press conference saying, "When it comes to the gas prices, we're going through an incredible transition that is taking place that, God willing, when it's over, we'll be stronger and the world will be stronger and less reliant on fossil fuels when this is over."

In the same response, Biden said he grew up in a home where gas prices were talked about around the dinner table, and he thinks the steps he's taking can help relieve some of the crushing burden of inflation that Americans are enduring.

But Sen. Tom Cotton (R-AR) said that's not true. "One of the reasons gasoline costs so much right now is, the Biden administration has waged a war on fossil fuel," Cotton said in an interview with Fox News

"This is not an accident. This is what Joe Biden promised in the campaign. This is what far-left members of the Democratic Caucus and Congress want. They want gas to cost $5, $6, $7 a gallon, because they want you out of your pickup truck or your minivan or your SUV, driving electric cars, or taking subways and trains to work," the Arkansas senator said.

"This is their intended goal. This is not an accident. What we should be doing is encouraging investors and industry to create more oil and gas and fossil fuel energy in America," he continued.

"These things take billions of dollars in investment and years to bring online, whether you're talking about oil and gas wells or pipelines or export facilities. And if the administration makes it clear that they are hostile to those investments, then it's not surprising that people are spending less money in the industry and therefore producing less oil and gas driving up your price at the pump."

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