Biden pushes Congress to a three-month gas tax holiday

WASHINGTON – President Biden on Wednesday called on Congress to suspend itself Federal gas taxWhile economists and lawmakers on both sides doubted the move would make much of a difference, it was an attempt by Americans to “breathe a little” from rising fuel prices.

During an afternoon speech, shortly before the midterm elections, he called for raising federal taxes – 18 cents a gallon for petrol and 24 cents a gallon for diesel – by the end of September. Biden asked Congress. The president called on states to suspend their own gas taxes, in the hopes of alleviating the economic pain that has contributed to his declining reputation.

“I fully understand that the gas tax holiday alone is not going to fix the problem,” he said. Biden said. “But it will provide some immediate relief to families. We can breathe a little as we continue to work to reduce prices in the long run.

However, the White House faces an uphill battle to gain congressional approval for the holiday. The administration and some Congress Democrats have been around for months Such suspension was discussed, Republicans are widely opposed to it and accuse the administration of undermining the energy sector. Mr. including Speaker Nancy Pelosi. Even members of Biden’s own party have expressed concern that companies will absorb most of the savings and leave little to consumers.

Kentucky Senator Mitch McConnell, the Republican leader, quickly rejected the president’s call for a tax suspension. “The big new idea of ​​this administration is a foolish plan that senior members of his own party have already shot down in advance,” he said.

He said he wanted to ensure that consumers benefit from the ban on federal taxes. Biden said. The administration estimates that several possible steps – tax cuts, suspension of state gas taxes and an increase in the refining capacity of oil companies – will reduce gas prices by at least $ 1 a gallon.

But critics have questioned the effectiveness of the gas tax holiday, dismissing it as more than just a pessimistic attempt by the White House and vulnerable Democrats to show that the party is focusing on the financial pain of Americans.

Economists and some members of Congress have criticized the idea of ​​cutting the federal gas tax as a futile move by the government, considering the revenue sacrificed in an effort to provide mild relief to consumers. Its impact on them will be minimal: the tax is now a fraction of the price of the pump, less than 5 percent of the total cost, and Americans will not even notice that it does not exist.

“I don’t think it moves the needle on people’s desire to buy more, and it doesn’t save them the whole money,” said Garrett Golding, business economist at the Federal Reserve Bank of Dallas. “Something seems to be being done to reduce gas prices, but not entirely there.”

This year, Russia’s invasion of Ukraine, President Vladimir V. Oil and refined fuel prices have risen to a 14-year high due to sanctions imposed on Putin and a resumption of energy use as the United States recovers from the corona virus outbreak. The White House has increasingly sought to blame Russia for the rise in prices A strategy that does little to alleviate stress Among Americans. After reaching $ 5 this month, the national average for regular petrol was $ 4.95 a gallon on Wednesday, according to the AAA.

Mr. Biden has released strategic petroleum reserves and suspended the summer sale of excess ethanol petrol blends in a bid to mitigate summer price hikes, which climate activists have not yet been pleased with due to the collapse of the president’s climate and social spending package.

Congress has not increased the federal gas tax since 1993. But it did not raise the tax either. Taxes on petrol and diesel now account for the bulk of federal funding used to build and maintain highways – $ 36.5 billion in 2019 Although in recent years expenses have outweighed commitment revenues.

I.e. Mr. Biden’s latest move to address a political vulnerability could undermine funding for one of his primary legislative achievements during his tenure: investments in infrastructure.

“I did not reduce the gas tax because of the infrastructure impacts there,” Sen. Shelley Moore Capito, a Republican from West Virginia, said Wednesday.

But one of the most common questions she asks members is: What about my petrol?

“I think this is a temporary solution,” Ms. Capito said. “But yes, people said, ‘Do something.'”

Florida Senator Rick Scott, head of the Senate Republican campaign unit, has questioned where the federal government generally sees revenue from the gas tax that supports the construction of roads, bridges and other infrastructure projects in his state.

“What cost are we going to cut?” He said the proposal to suspend the tax “shows that Democrats know they are in deep trouble.”

Mr. Biden sought to alleviate those concerns on Tuesday.

“Look, it will have some impact, but it is not going to have an impact on major road construction and major repairs,” he told reporters, adding that there is a lot in management. Ability to maintain roads.

It will cost about $ 10 billion to stop taxes. Senior executives said Biden would ask Congress to drown in other money to make up for the loss.

But experts have questioned how much the gas tax holiday will benefit consumers as global oil demand and broken market prices rise.

“Whatever you think about the specialty of the gas tax holiday in February, it’s a bad idea right now,” said Jason Furman, chairman of the Economic Advisory Council under President Barack Obama. Posted on TwitterThey argue that the oil industry will keep most of its savings in the pocket.

For example, even if all the benefits were passed on to the consumer, if the owner of the Ford F-150 drove 20 miles a thousand miles a month, about $ 9 would be saved if the federal gas tax was stopped.

Progressive and energy experts have suggested alternatives Smooth Gas price shocks or siphon off Oil companies and refineries took some ballooning profits while supply was restricted. Hillary Clinton in the 2008 presidential campaign as inflation adjusted prices closer to a point Proposed Combining the gas tax holiday with the tax on oil company profits.

But of the limited tools available to the federal government to reduce gas prices, raising taxes would resonate most with Americans.

“This is a matter of concern to the electorate. This is something that politicians are concerned about,” said Eric Muhlecker, an associate professor of economics at the University of California, Davis.

Dr. A.S. Muehlegger’s Research Drivers have been found to adjust their consumptions to changes in gas prices rather than making market-based changes of the same magnitude.

New Hampshire Democrat Sen. Maggie Hassan, who is facing a tough re-election attempt, has called on voters to provide relief to voters. Biden said he wanted to go further. In a statement, he said the White House should move forward with a year-round gas tax suspension instead of three months.

“I will continue to press my colleagues in Congress to stop the gas tax and continue to urge the President to take administrative action to immediately reduce household energy costs,” he said.

As states’ taxes and tariffs rise steadily, states have more power to reduce gas prices by an average of about 38 cents a gallon. Three states have so far passed gas tax holidays: Maryland, Georgia and Connecticut. New York Suspended Its line earlier this month, and Florida Will lift Its tax for the month of October.

However, petrol manufacturers and retailers will often reap some benefits. A Analysis According to economists at the University of Pennsylvania’s Ben Warden’s budget model, in states where gas prices have ended holidays, 58 percent to 87 percent of the value of the suspended gas tax is paid to consumers, with suppliers absorbing the rest. A federal suspension would be too small and could be overshadowed by the evaporating base price of oil that fell last week.

Mr. Biden plans to target oil companies on Wednesday. Executives are accused of seeking profit And “exacerbates pain” for consumers. Refineries worldwide have added less than 1 percent of their capacity, despite refineries struggling to keep up with growing demand.

Emily Cochrane, Katie Edmundson And Stephanie Loy Contributed report.