White House takes new look at federal gas tax holiday
(The Hill) – The White House is showing signs that it is more seriously considering a federal gas tax holiday, sources tell The Hill.
President Biden’s economic team has discussed the gas tax holiday recently and is expected to meet later this week for further talks.
The White House is under political pressure to do something to provide relief to Americans dealing with high inflation and rising gas prices. The economic storm has created serious headwinds for Democrats ahead of the midterms, where the party is worried about a shellacking.
“It’s definitely an option on the table,” said one Democrat close to the White House.
Suspending the federal gas tax would require an act of Congress, but a public push by Biden in favor of the policy could help spur action on Capitol Hill.
Some are pitching the White House on the idea.
Robert Wolf, the former CEO of UBS Americas who served as an economic advisor to President Obama, said he is supportive of the Biden administration implementing a federal gas tax holiday but only during the period of Russia’s war in Ukraine, which has driven up prices.
He said most of the recent price increases in gas are linked to the Russian war.
“I know that some may view this as somewhat gimmicky because it will revert itself at some point but a majority of the recent gas hike since the beginning of the year has been due to the Russian invasion,” Wolf told The Hill on Monday. “I think tying it solely to the war and setting an end date makes it more strategic and smart.”
“I also think it ties directly into the Putin price hike narrative and aligns well with President Biden’s concern about how inflation is impacting hard-working Americans and he will use every tool available,” he added.
A handful of states have already moved to suspend their gas tax and Wolf said he would support Biden calling on remaining states that haven’t yet done so to follow suit.
The White House has repeatedly said that nothing is off the table when it comes to combating rising gas prices.
“It’s clear the White House is doing absolutely everything it can right now,” said Josh Freed, leader of the climate and energy program at the centrist Democratic think tank Third Way. “It would make sense that a gas tax holiday is on the table as part of their strategy.”
But Freed and others in Washington say that a federal gas tax holiday would have little impact for consumers.
An estimate from the Penn Wharton Budget Model released earlier this year found that suspending the federal gas tax from March to December of this year would reduce average gasoline spending by between $16 and $47 for that period.
Mark Zandi, chief economist at Moody’s Analytics, said that studies have shown that roughly two thirds of the tax cut would be captured by energy companies. He also argued that the tax relief wouldn’t be targeted enough to reach lower and middle-income Americans, noting that wealthy individuals would benefit equally from the holiday.
The money raised by the federal gas tax also helps fund infrastructure projects across the country, meaning that a suspension of the tax could hamper those projects down the road.
“You also run the risk of undermining funding for infrastructure which is critical for the economy’s long-term growth,” Zandi said.
Still, the idea gained traction earlier this year among some Democrats on Capitol Hill. Sens. Maggie Hassan (D-N.H.) and Mark Kelly (D-Ariz.), both of whom are facing difficult reelection bids, introduced legislation back in February that would temporarily suspend the federal gas tax until next January.
“What I’ve been pushing for is, among other things, suspending the gas tax. That helps put some more money back in people’s pockets,” Hassan told Fox News on Friday. “I’m pushing the administration to support that. They haven’t yet, and that’s frustrating.”
The administration has limited and dwindling options to address rising gas prices and inflation.
Biden has taken a range of targeted actions, including ordering an unprecedented release from the Strategic Petroleum Reserve earlier this year and putting pressure on oil companies to ramp up production.
Following a speech at the Port of Los Angeles on Friday, Biden took aim at oil companies, accusing them of purposefully not ramping up production in order to charge more.
“Exxon made more money than God this year,” Biden said.
Biden is also weighing a trip to Saudi Arabia in the coming weeks, which many experts believe will be focused in part on urging the country to ramp up production of oil so there is more supply on the global market.
Most Americans say they expect inflation to continue to increase in the coming months, according to a survey by the Washington Post and George Mason University’s Schar School of Policy and Government. The poll showed that nearly three quarters of Americans are cutting back on spending including on restaurants and entertainment, bracing for the worst to come.
“The president continuing and increasing his dictation of the public of the challenge right now and really pushing the producers to produce more oil, and get it into the economy and getting more refineries back online to refine this is what needs to get done,” Freed said.