Is a Gas Tax Holiday in the Cards? And Would it Actually Help?
President Joe Biden called on congress today to suspend the federal tax of 18 cents per gallon of gas and 24 cents per gallon of diesel until the end of September in attempts to ease price pressures at the pump. Biden also called on states to suspend their own gas taxes, as the cost for a gallon of gas sits at an average of $5 nationwide, according to AAA.
If the savings were fully passed along, consumers would save roughly 3.6% when filling up their gas tanks, the Associated Press reported. But some have serious doubts if a gas tax holiday would actually help prices, and others worry it could damage the economy further.
Former President Barack Obama slammed a gas tax holiday proposal in 2008, calling it a "gimmick," and writing in his memoir that he was "sure that consumers wouldn't see much benefit. In fact, gas station owners were just as likely to keep prices high and boost their own profits as they were to pass the savings to motorists."
Gilbert Metcalf, professor economics at Tufts University, told Forbes that a gas tax holiday "is a terrible idea" because "it will increase demand and just drive gasoline prices up. That in turn will drive oil prices a bit higher. To dampen prices, we need to boost supply, not demand."
The American Trucking Associations (ATA) also expressed serious concern about the idea of a gas tax holiday because the tax is what funds roads and bridges. "After months of touting the passage of the well-funded Infrastructure Investment and Jobs Act—a much-needed investment in our nation's roads and bridges—the Biden Administration wants to cut that same highway system's primary source of funding with a suspension of the federal fuel tax," reads a note from the ATA.