Thursday, June 30, 2022

Explainer: How Biden’s proposed gas tax holiday would work

by Matthew Daly

WASHINGTON ( Associated Press) — Facing high gas prices nationwide, averaging $5 per gallon, President Joe Biden on Wednesday urged Congress to suspend federal gasoline and diesel taxes for three months.

If the savings from the 18.4 cents-a-gallon federal tax on gas were passed along entirely to consumers, drivers would save about $2.76 for filling a 15-gallon.

It is unclear, however, if Biden can push his proposal through Congress, where lawmakers, including some Democrats, doubt or even oppose the idea. Many economists are also wary of the gas tax holiday.

A look at how the proposed gas tax holiday would work and how it could impact gas prices and a highway trust fund, which is largely paid for by taxes on gasoline and diesel fuel.

Why is Biden Proposing a Gas Tax Holiday?

Ever since Russian President Vladimir Putin began gathering troops at Ukraine’s border, the price of gas has soared dramatically around the world—and about $2 a gallon in the United States. High gas prices are a fundamental threat to Biden’s political and policy ambitions. They have instilled confidence in the economy, contributed to record inflation and adds to the formidable challenges facing Democrats to take control of the House and Senate in November.

Biden’s previous efforts to cut gas prices – including the release of oil from the US Strategic Reserve and greater ethanol blending this summer – have done little to produce savings at the pump. Biden says the gas tax holiday could provide some direct relief to consumers, and he is calling on states to follow suit by suspending their own gas taxes or helping consumers in other ways.

“I’m doing my job. I want Congress, the state, and industry to play their part too,” he said in a White House speech.

How much money will drivers save?

It’s not clear how much drivers will save; Much depends on whether states reduce or suspend their own gas taxes, as Biden has suggested. But it is not clear how many will do so.

There is also the question whether the entire savings will be passed on to the drivers.

Still, recent studies indicate that the gas tax holiday will result in lower prices.

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A Penn Wharton budget model analysis states that recent suspensions of state gasoline taxes in Maryland, Georgia and Connecticut were mostly passed on to consumers in the form of lower gas prices. The report said that about 72% of tax savings passed on to consumers in Maryland, up to 65% in Georgia, and up to 87% in Connecticut.

However, the cut in prices did not last throughout the tax holiday, and increased after the holiday was over, the report said.

How much will a gas tax holiday cost?

The administration says the three-month stay will cost about $10 billion. Lost revenue would otherwise go to the Highway Trust Fund, which finances most federal government spending for highways and mass transit.

Critics of the tax holiday say it could reduce spending on roads, bridges and other infrastructure that is a hallmark of the Biden presidency. But the White House says money can be transferred from other government accounts and that infrastructure is a top priority for the president.

If the holiday is extended, as some experts expect, the cost could be tens of billions more and jeopardize the administration’s efforts to build and maintain roads and bridges.

Dave Bauer, president and CEO of the American Road and Transportation Builders Association, said even a temporary gas tax holiday “sets a bad precedent and undermines the funding mechanism in the infrastructure investment law that Biden wants.” The Presidency’s signature policy has been an achievement.”

What does Congress say?

MPs from both parties expressed skepticism, or even outright opposed.

House Speaker Nancy Pelosi said lawmakers will see “where is the consensus on the way forward” for Biden’s plan, but she and other congressional Democrats have long worried that suspending the gas tax will leave oil companies without any guarantees. will be allowed to obtain additional benefits of be delivered to the consumers.

Peter DeFazio, D-Ore., chairman of the House Transportation and Infrastructure Committee, said he opposes the tax suspension partly because it provides minor relief and may be permanent. “You know what happens in this city: You suspend the tax, it’s gone forever,” he said on Wednesday. “I do not want to compromise with the Highway Trust Fund. We haven’t raised the gas tax since 1993, and it now costs 6 cents compared to 1993. No, I do not in any way support to demean that contribution in rebuilding our crumbling infrastructure. ,

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Meanwhile, Senate Republican leader Mitch McConnell mocked the gas tax holiday as an “ineffective stunt,” while Rep. Kathy McMorris Rodgers, R-Wash. Called it a “political band-aid” that would do little to reduce costs at the gas pump.

McMorris Rodgers, the top Republican on the House Energy and Commerce Committee, said the plan could have long-term consequences on road safety and improvements by diverting funding from infrastructure projects across the country. “Under President Biden’s proposal, people will be forced to drive on unsafe, potholed roads to get the gas they can’t afford,” she said.

House Majority Leader Steny Hoyer, D-MD, said he was unsure whether Democrats had the votes to pass it. “We haven’t counted, so we don’t know yet.”

What do experts say?

Mark Goldwyn, senior policy director for the Nonpartisan Committee for a Responsible Federal Budget, said the gas tax holiday won’t dent inflation or produce big savings at the pump. He also worried that it may not be temporary, as suggested by the White House.

“Do we really think that gas prices will come down in three months? Are we going to raise prices just before the election? Goldwyn asked in an interview. Long-term suspension of the gas tax, the construction of roads and bridges,” he said. and would be disastrous for the administration’s efforts of maintenance.

But Mark Zandi, chief economist at Moody’s Analytics, said that high gas prices are “the number one financial problem for many American households, especially those on low incomes. Zandi said, while short, the gas tax holiday “helps these households.” There is a move to do.” “They are under a lot of pressure because of high gasoline prices. And it aims to provide some temporary relief. I mean, it is very clear why the administration is focusing on this.

Still, Zandi said the plan is “not a slam-dunk solution. It is marginalized.

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Associated Press writers Josh Bok, Nathan Elgren and Kevin Freking contributed to this story.

Nation World News Desk
Nation World News Deskhttps://nationworldnews.com
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