Trump says he wants to suspend the gas tax. Here’s what that means for you and your wallet.
President Trump said Monday he supports suspending the federal gas tax “for a period of time” to help reduce pump prices that have risen dramatically since the start of the war with Iran.
“I think it’s a great idea,” the president told CBS News during a phone interview. “We will eliminate the gas tax for a period of time and phase it back in when gas runs low.”
average national price According to AAA, the price of a gallon of gasoline was $4.52 on Monday. This represents an increase of approximately 50% where prices stand Shortly before the start of the war in late February.
Trump’s comments came a day after Energy Secretary Chris Wright said: NBC News He said the administration is considering suspending the federal gas tax.
“This administration supports any action that can be taken to lower prices at the pump and lower prices for Americans,” Wright said. “We are open to all kinds of ideas”
However, the Trump administration does not have the authority to unilaterally suspend the gas tax. Congress I will have to pass a bill For the policy to come into force. Some Republicans have come forward to support legislation that would pause the gas tax following Trump’s comments, but it remains to be seen whether there is enough bipartisan support for the idea to become law.
If a bill is passed, it would only affect the federal gas tax, which is currently approx. 18 cents per gallon 24 cents per gallon for regular gas and 24 cents per gallon for diesel. State gas taxes, averaging 33 cents per gallon, will still remain in effect unless lawmakers at the state level take action. Since the beginning of the war, a handful of states have Georgia, indiana And Utah – have taken steps to temporarily suspend gas taxes. This idea has also been a matter of great controversy. California governor’s race.
What does the gas tax pause mean?
It’s understandable why lawmakers might propose a gas tax holiday when prices at the pump begin to rise. The policy offers a quick and simple way to reduce the cost of a commodity on which the entire economy depends.
“Suspending the federal gas tax will help lower prices and provide much-needed relief to families,” said Arizona Senator Mark Kelly. wrote When he proposed a gas tax holiday in March.
Whenever gas prices start to rise, calls for suspension Gas taxes tend to follow suit. But many experts oppose idea. The consensus among economists is that this would provide minimal benefits, fail to address the underlying causes of price increases, and rob the government of much-needed tax revenue.
“In a time of political and economic uncertainty, drivers should be aware that such tricks can be economically detrimental,” said tax policy expert Adam Hoffer. Tax Foundationhe warned last month.
One of the main arguments against a gas tax holiday is that taxes make up a relatively small percentage of the cost of a gallon of gas. If you erased the entire cost of the federal gas tax, the average gas gallon nationwide would still be $4.34, about the same level as it was two weeks ago. Drivers who fill a 15-gallon tank will save $2.70.
Taxes now make up a much smaller share of the gas price than they used to. The gas tax has not been increased since 1993. average gallon of gas It was $1.17. At the time, the 18-cent federal tax represented about 15% of the total gas price. Now about 4%
Consumers also shouldn’t expect to take full advantage of the gas tax suspension. Studies of past gas tax holidays have shown that manufacturers and other companies in the supply chain absorbs some of the relief themselves. That means drivers probably won’t see a full 18 cents per gallon drop in prices if the federal tax is suspended.
Pausing the gas tax also won’t solve the underlying problem that’s causing prices to soar. The ongoing conflict with Iran has caused the flow of oil through the Strait of Hormuz, a critical chokepoint for the global oil industry, to come to a near halt. As long as it is closed, the world’s oil supply will be restricted and prices will fall. likely to continue climbing. The major disruptions caused by the war mean that even if the strait were opened, it would take some time for prices to fall back to previous levels.
Gasoline has been rising about 2 cents per gallon per day since the war began. If the gas tax is suspended today and this rate of increase remains the same, the price per gallon will return to its current level by the middle of next week.
What are gas taxes paid for?
Federal gas taxes go into the Highway Trust Fund, a massive government account used for road construction, highway maintenance and public transportation projects. It looks like this fund will run out of money by 2028. last prediction It found that a pause in the gas tax would cost the trust fund $2.5 billion a month.
“A one-month holiday would accelerate trust fund bankruptcy by roughly two weeks, while a six-month holiday would accelerate bankruptcy by almost a year,” the Committee for a Responsible Budget wrote in March.
State gas taxes usually go right It also includes highway improvement and other infrastructure projects.
With reduced revenue from gas taxes, governments at the state and federal levels will have to decide whether to cut infrastructure spending, repurpose funds from elsewhere in the budget, or raise other taxes to make up for the shortfall.
“Everything has trade-offs,” Secretary Wright said Sunday when asked about the impact of pausing the gas tax.
