WASHINGTON — President Biden plans on Wednesday to call on Congress to temporarily suspend the federal gas tax, in an effort to dampen rising fuel prices that have fueled frustration in the United States.
Speaking on Wednesday afternoon, Mr. Biden will ask Congress to lift federal taxes — about 18 cents per gallon of gasoline and 24 cents per gallon of diesel — until the end of September, just before the fall midterm elections, senior officials said on condition of anonymity. to discuss the announcement on Tuesday evening. The president will also ask states to suspend their own gas taxes, in hopes of easing the economic pain that has contributed to the president’s waning popularity.
However, the White House will have to face an uphill battle to get Congress to approve the holiday. While the government and some Democrats in Congress have been discussing such a suspension for months, Republicans have broadly opposed it, accusing the government of undermining the energy industry. Even members of Mr Biden’s own party, including chairman Nancy Pelosi, have expressed concern that businesses would absorb much of the savings, leaving little for consumers. West Virginia Democrat Joe Manchin III said this year the plan “isn’t right.”
Biden will demand that companies ensure consumers take advantage of the federal tax moratorium, officials said, though they did not specify how he might do that. The government estimates that the measures, combined with a cessation of state gas taxes and an increase in refining capacity by oil companies, would lower gas prices by at least $1 a gallon, although experts have questioned the effectiveness of gas tax vacations.
The national average for regular gasoline was $4.98 a gallon Monday, according to AAA, after exceeding $5 this month. Oil and refined fuel prices have soared to their highest level in 14 years, largely as a result of Russia’s invasion of Ukraine and ensuing sanctions, as well as an uptick in energy consumption as the economy recovers from the coronavirus pandemic. The White House has increasingly sought to blame Russia for rising prices, a strategy that has done little to quell fears among Americans.
Mr Biden has also released strategic petroleum reserves and suspended a summer ban on the sale of higher ethanol gasoline blends to try to temper price hikes at the pump, fueling frustration among climate activists who are still unhappy about Mr Biden’s climate collapse. – and social spending, is being fueled. package.
Economists have generally dismissed the idea of suspending the gas tax as ineffective and a waste of public resources. The reason? The federal gas tax is now such a small fraction of the price at the pump, coming in at less than 5 percent of the total cost, that consumers may not even notice.
“I don’t think it affects people’s tendency to buy more, nor does it really save them much money,” said Garrett Golding, a business economist at the Federal Reserve Bank of Dallas. “It sounds like something is being done to lower gas prices, but there aren’t many of those.”
Congress has not increased the federal gas tax since 1993. But it never lifted the tax either. Taxes on gasoline and diesel now provide most of the federal funding used to build and maintain highways — $36.5 billion in 2019 — although spending has exceeded allotted revenue in recent years.
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That means Mr Biden’s latest move to address one political vulnerability could undermine funding for one of the most significant legislative achievements during his tenure: infrastructure investment.
Mr Biden, who has publicly discussed the idea of a tax break in recent days, tried to allay those concerns on Tuesday.
“Look, it will have some impact, but it will not impact major road construction and major repairs,” Mr Biden told reporters, adding that the administration has sufficient capacity to maintain roads.
The tax suspension would cost about $10 billion. Senior administration officials said Mr. Biden would demand that Congress dive into other pots of money to make up for the loss, which it has done for many years because gas tax revenues have failed to keep pace with highway construction and maintenance. .
But as global demand for oil and a fragmented market have pushed prices up, experts have wondered how much consumers would benefit from the gas tax holiday.
“Whatever you thought of the benefits of a February gas tax vacation, it’s a worse idea now,” said Jason Furman, the chairman of the Council of Economic Advisers under President Barack Obama. Posted on Twitter, arguing that the oil industry would probably take the bulk of the savings.
Consider an average example: Even if all the benefits were passed on to consumers, the owner of a Ford-150 that drives 20 miles a gallon and drives a thousand miles a month would save about $9 if the federal gas tax were suspended — the costs a decent ham sandwich these days.
Progressives and energy experts have argued for alternative ways to smooth out gas price shocks or to channel some of the soaring profits that oil companies and refineries have reaped while supply has been limited. In her 2008 presidential campaign, as inflation-adjusted prices approached an even higher point, Hillary Clinton suggested combining a gas tax vacation with a levy on oil company profits.
But of all the weak tools at the federal government’s disposal to lower gas prices, the removal of taxes is the most notable.
“That’s what voters care about. That’s what politicians care about,” said Erich Muehlegger, an associate professor of economics at the University of California, Davis. “Things like a windfall tax on oil companies may be attractive from a political point of view, but we don’t necessarily think they will have an immediate impact on gas prices.”
From research by Dr. Muehlegger has found that motorists adjust their consumption more in response to changes in gas prices than market-based changes of comparable magnitude, in part because of the media attention generated by those changes.
States have more power to lower gas prices as their taxes and fees have steadily risen, to an average of 38.07 cents per gallon. Three states have so far passed and completed the gas tax vacation: Maryland, Georgia and Connecticut. New York suspended the tax early this month and Florida lifted the tax for the month of October.
However, gasoline producers and retailers will most likely reap some of the benefits. An analysis by economists using the Penn Wharton Budget Model at the University of Pennsylvania showed that in the states where the gas price vacations have ended, between 58 and 87 percent of the deferred gas tax value was passed on to consumers, with suppliers accounting for the rest. A federal suspension would be so much smaller that it may be obscured by the volatile underlying oil price, which has fallen over the past week.
Biden also plans to attack oil companies on Wednesday, demanding they expand refining capacity to cut costs at the pump, just days after accusing executives of profit-seeking and “exacerbating the pain” for consumers. While refineries are struggling to keep up with growing demand, refineries worldwide have added less than 1 percent to their capacity.
The government could also expand refinery capacity by easing permitting rules to reopen a site in St. Croix in the Virgin Islands that has a bad environmental history. But that move would likely be met with a backlash from environmentalists, who are already frustrated by the sideline of some of the president’s sprawling climate initiatives.
Michael K. Wirth, the chief executive of Chevron, one of seven refiners the White House asked for a meeting this week to discuss lowering their prices, dismissed Mr Biden’s criticisms on Tuesday. Rather than just blaming the companies, he said, cutting the high gas price would require a “change in approach” from the government.
“I didn’t know their feelings would get hurt so quickly,” Mr Biden said. “Look, we need more refining capacity. The idea that they don’t have oil to drill and bring forward is just not true.”