Biden Calls on Congress to Suspend Federal Gas Tax for 90 Days

U.S. President Joe Biden on Wednesday called on Congress to suspend the federal gas tax for 90 days. At present, the federal gas tax is 18 cents for a gallon of regular gasoline and 24 cents per gallon for diesel. "By suspending the 18-cent gas tax, federal gas tax for the next 90 days, we can bring down the price of gas and give families just a little bit of relief," said Biden in a speech from the White House.

The White House issued a statement:

"Those taxes fund critical highways and public transportation, through the Highway Trust Fund. But in this unique moment, with gas prices near $5 a gallon on average across the country, President Biden is calling on Congress to suspend the gas tax for three months – until the end of September – to give Americans a little extra breathing room as they deal with the effects of Putin’s war in Ukraine."

Many people are suggesting this is not the right approach. Among the points being made:

• Straightforward economics suggests reducing the price of a good increases demand.
• The savings also disproportionately accrue to people who burn a lot of fuel in their pickups and SUVs.
• Gas prices still are not very high by international standards.
• The 18.4 cents-a-gallon federal tax goes to the Highway Trust Fund and is way too low. It has not been raised since 1993 so every taxpayer, including everyone who doesn't drive a gas-powered car, has been topping it up. This will just make the situation worse.
  

A lot of different Davids have something to say about this. Harvard Kennedy School's David Zipper tweets, "Federal gas tax holiday" sounds like a happy windfall (misleading, since taxpayers will still pay for transportation). 'Gas guzzler reward' is more accurate." Columnist David Sirota tweets, "The climate crisis is incinerating the planet, and Joe Biden is pushing a gas tax holiday instead of pushing to make mass transit free."

Other leaders have taken different approaches to similar crises.

During the 1973 Arab oil embargo of the United States and western Europe, the price of gasoline quadrupled and supplies were limited. So on January 2, 1974, then-president Richard Nixon signed the Highway Energy Conservation Act, lowering the speed limit to 55 mph for the entire country. History.com notes: "Even after OPEC lifted the embargo in March 1974, drivers continued to face high gas prices and attempted to conserve fuel by buying revolutionary Japanese economy cars."

In Denmark, they started promoting alternatives to cars and fossil fuels. Adele Peters wrote in Fast Company:

"The oil crisis helped lead to faster changes in the 1970s. Driving was temporarily banned on Sundays because of the shortage of gas. 'I remember, as a child, walking in the middle of the highway,' says Klaus Bondam, CEO of the nonprofit Danish Cyclists Federation. A growing environmental movement started talking about bikes as alternative transportation. The city eventually abandoned plans for some major new road projects, pedestrianized more streets, and banned through-traffic in other areas."

Everything Biden is doing is on the supply side of the equation. In addition to the tax break, the fact sheet from the White House notes he has opened the taps on the Strategic Petroleum Reserve to reduce prices, when he probably should be saving it for strategic reasons—there is a war on that could spread.

"He rallied international partners to join us, releasing a combined 240 million barrels of oil on the market," reads the White House sheet. By becoming buddies with former pariah Saudi Arabia.

"He expanded access to biofuels like E15—gasoline that uses a 15 percent ethanol blend—to increase supply and lower prices at thousands of gas stations across the country," the sheet notes. This, as we noted before, will raise food prices and increase hunger.

Nothing is being done to reduce demand. No incentives to walk or bike, to extend working from home, and definitely no Nixonian speed limits. It is, after all, an election year. And it's not likely to pass through Congress anyway. It seems that more Democrats are against it than Republicans, with activists noting: "A Big Oil windfall profits tax would stick it to the profiteers and get relief to people without incentivizing more consumption. It’s better policy and better politics." And of course, Democratic Sen. Joe Manchin is against it.

It also might be appropriate to mention we are in a climate crisis, and people are baking across the country in heat waves that have come earlier and hotter than ever. Working to cut demand for fossil fuels has many benefits.

They could work the demand side. Nope. Instead, they will throw money at drivers.