Biden Will Back a Three-Month Federal Gas Tax Holiday Despite Threat of Higher Inflation

AP Photo/Jeff Chiu

The Biden White House is signaling that it will back a federal gas tax holiday proposal in Congress, according to numerous sources. The holiday would last three months.


Congress has been reluctant to suspend the 18.4 cents-per-gallon federal gas tax and 24.4 cents per gallon for diesel for any length of time, citing the loss of revenue in an era of tight budgets and the probability that suspending the tax would lead to higher inflation in 2023.

But the gas tax holiday would bring prices at the pump down, which is all the president cares about. With the midterm elections approaching, Biden has very little opportunity to put downward pressure on prices. Suspending the gas tax is one of them.

Fox Business:

But the Committee for a Responsible Federal Budget, a non-partisan group that advocates for reducing the federal budget, previously argued that suspending the tax for a 10-month period could actually increase demand for gasoline and other goods and services when the economy is already confronting high consumer demand and pandemic-induced supply chain disruptions.

While the gas tax holiday may reduce prices at the pump, it will further increase demand for gasoline and other goods and services at a time when the economy has little capacity to absorb it,” the blog post said. “The result could be even higher rates of inflation in 2023.”

Suspending the gas tax for 10 months would also reduce revenue by about $20 billion, according to the CRFB.

The White House is going to hold oil companies and refiners responsible for cutting the cost of gas at the pump even though Big Oil has little to say about how retailers price their gas. Reporters at the briefing wanted to know what the White House was going to do to “mandate” that oil companies “pass on” savings from cutting the gas tax “in full” to customers.


Sorry, guys. It doesn’t work like that.

ABC News:

Researchers at the University of Pennsylvania’s Wharton School recently found that the suspension of gas taxes in Maryland, Georgia and Connecticut were, in fact, “mostly passed onto consumers at some point during the tax holiday in the form of lower gas prices,” but that the lower prices “were often not sustained during the entire holiday.”

In Maryland, 72% of the tax savings were passed on to consumers; in Georgia, 58-65% were, and in Connecticut, 71-87% were, according to their analysis.

The market in Georgia is different from the market in Maryland which is different than the market in Connecticut. And with the constant upward pressure on prices, how is any company or retail outlet expected to maintain the same price for a gallon of gas when their costs are going up?

Biden will likely get his gas tax holiday. And when it doesn’t have the intended effect, he will lash out at the oil companies again because they’re sitting ducks.

And when prices shoot up for everything else, who will he blame then?


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