Facing stubbornly high gas prices that average about $5 a gallon nationwide, President Joe Biden on Wednesday urged Congress to suspend federal gasoline and diesel taxes for three months. If savings from the 18.4 cents-a-gallon federal tax on gas are fully passed along to consumers, drivers would save about $2.76 for a 15-gallon fill-up. It’s unclear, though, if Biden can push his proposal through Congress, where lawmakers, including some Democrats, are skeptical or even opposed to the idea. Many economists also are wary of a gas tax holiday. A look at how the proposed gas tax holiday would work and what impact it might have on gas prices and a highway trust fund that is paid for in large part by taxes on gasoline and diesel fuel. WHY IS BIDEN PROPOSING A GAS TAX HOLIDAY? The price of gas is up dramatically around the world — and by nearly $2 per gallon in the United States — since Russian President Vladimir Putin began amassing troops on the border of Ukraine. High gas prices pose a fundamental threat to Biden’s political and policy ambitions. They’ve caused confidence in the economy to slump, contributed to record inflation and adds to the formidable challenges that Democrats face in keeping control of the House and the Senate in November. Biden’s past efforts to cut gas prices — including release of oil from the U.S. strategic reserve and greater ethanol blending this summer — have done little to produce savings at the pump. Biden says the gas tax holiday can provide some direct relief to consumers, and he is calling on states to follow suit by suspending their own gas taxes or helping consumers in other ways. “I’m doing my part. I want Congress, states and industry to do their part as well,” he said in a White House speech. HOW MUCH MONEY WOULD DRIVERS SAVE? It’s unclear exactly how much drivers would save; a lot depends on whether states lower or suspend their own gas taxes, as Biden has suggested. But it’s not clear how many would do so. There’s also the question of whether the full savings would be passed on to drivers. Still, recent studies indicate that a gas tax holiday would result in lower prices. A Penn Wharton Budget Model analysis says recent suspensions of state gasoline taxes in Maryland, Georgia and Connecticut were mostly passed onto consumers in the form of lower gas prices. About 72% of tax savings in Maryland were passed onto consumers, up to 65% in Georgia and up to 87% in Connecticut, the report says. However, the price reductions were not sustained during the entire tax holiday, and prices rose once the holiday was lifted, the report said. HOW MUCH WOULD A GAS TAX HOLIDAY COST? The administration says the three-month pause would cost about $10 billion. The lost revenue would otherwise go to the Highway Trust Fund, which finances most federal government spending for highways and mass transit. Critics of the tax holiday say that could lead to decreased spending on roads, bridges and other infrastructure that are the hallmark of the Biden presidency. But the White House says the money could be transferred from other government accounts and that infrastructure remains a top priority for the president. If the holiday is extended, as some […]

The post EXPLAINER: How Biden’s Proposed Gas Tax Holiday Would Work appeared first on The Yeshiva World.