Biden calls for three-month gas tax holiday. Here’s what it could mean for your wallet

The White House has proposed suspending federal gas and diesel taxes for the next three months to help ease pain at the pump, but what does that mean for consumers?

President Joe Biden called on Congress to pass a so-called gas tax holiday for the next three months in a speech from the White House on Wednesday, June 22.

“We’ll still be able to fix our highways and bring down the price of gas,” Biden said in his speech. “We can do both at the same time.”

Biden said he understands that a gas tax holiday alone won’t solve the problem of high gas prices, but said it will provide families with some relief.

Biden also called on oil refinery companies to boost production of gasoline to try to quell the rising fuel prices, which average $4.95 per gallon across the United States, AAA reported.

Here’s what you need to know:

What does it mean for consumers?

The federal government would stop collecting the taxes — currently 18 cents per gallon on gas and 24 cents per gallon on diesel — through the end of September.

The White House hopes those savings would be passed on to consumers.

“I call on the companies to pass this along, every penny,” Biden said. “There’s no time now for profiteering.”

But some economists warn there’s no guarantee that American drivers would see prices drop by as much as the tax.

“It would be very unlikely that gas prices would fall by more than a dime because of this change,” Jason Furman, a top economic adviser to former President Barack Obama, told NPR. “And oil company profits would go up by billions of dollars.”

Oil companies reported record profits in the first quarter of 2022, Business Insider reported. ExxonMobil, for example, doubled its net profit to $5.5 billion over the first quarter of 2021..

Experts also warn the move could increase inflation by stimulating spending, said Carola Binder, an associate professor of economics at Haverford College.

“By making gas cheaper that allows people to buy more of it,” Binder told NPR.

Biden also risks a backlash when the proposed gas tax holiday ends, experts warned.

“It’s going to be very unpopular when prices snap back up by 18 cents a gallon,” GasBuddy’s Patrick DeHaan told CNN.

What happens now?

The proposal next goes to the U.S. House and Senate, where similar bills are already under consideration, The Hill reported.

But it’s not clear how quickly lawmakers will move to pass the legislation — or if it will pass at all.

Republicans oppose lifting gas taxes, CNN reported. On Wednesday, Sen. Mike Lee, R-Utah, called it “treacherous” and said it would drive up inflation, Fox News reported.

And some members of Biden’s own party have expressed doubts about a gas tax holiday, with concerns about cutting into infrastructure funding and seemingly shifting priorities away from renewable energy.

What about state gas taxes?

State gas taxes average 26.2 cents per gallon on gasoline and 26.7 cents per gallon on diesel, on top of federal gas taxes, USA Today reported.

In his speech Wednesday, Biden called on state governments to also suspend collecting their gas taxes for the summer.

Some states already have, including Connecticut, Florida, Georgia, Maryland and New York, The Hill reported. Other states are studying the idea.

But until more states pass their own legislation, most state gas and diesel taxes remain in effect.

What do federal gas taxes pay for?

Most federal gas tax revenues fund highway infrastructure via the Highway Trust Fund, which also helps pay for mass transit, USA Today reported.

Federal gas and diesel taxes accounted for 84% of revenue to the fund in 2020, or about $43 billion, according to the publication.

The White House said in a statement that the government can afford to cover the estimated $10 billion that a gas tax holiday would cost the highway fund.

What else is the federal government doing about gas prices?

BIden earlier ordered 1 million barrels per day released from the country’s Strategic Petroleum Reserve to increase the supply of gasoline and try to lower prices, the White House said.

He also called for help from international allies, releasing another 240 million gallons of oil, and called for a global increase in oil production, according to the White House.

This story was originally published June 22, 2022 at 11:11 AM with the headline "Biden calls for three-month gas tax holiday. Here’s what it could mean for your wallet."