Democrats weigh gas tax holiday to ease inflation pressure on Americans

The White House has signaled it is open to looking at an unusual way to help bring Americans relief at the pump: a gas tax holiday. The move would be the latest in a series of efforts to help Americans struggling with rising inflation, just as coronavirus cases have been easing.

Consumer prices are rising at the fastest pace in 40 years amid high demand and supply chain disruptions. And energy costs are seeing some of the biggest increases with gas prices up 40% from last year. The national average price of gas is $3.49 a gallon according to AAA. One year ago, the average was $2.50 a gallon.

“Every tool is on the table to reduce prices,” said White House assistant press secretary Emilie Simons, in response to a question about whether the administration is considering a gas tax holiday. “The president already announced an historic release of 50 million barrels from the Strategic Petroleum Reserve, and all options are on the table looking ahead.” 

A group of Democratic senators has already proposed waiving the federal gas tax to help provide some relief. The legislation, introduced by Senators Mark Kelly and Maggie Hassan, would temporarily suspend the federal gas tax — which has been 18.4 cents per gallon — through the end of the year.

“We haven’t yet taken a caucus position,” said Senate Majority Leader Chuck Schumer Tuesday about the gas tax. “But it’s one of the things, of many things, that we’re looking at in terms of reducing costs.”

As Democrats and President Biden grapple with how to address inflation, CBS News polling shows only 35% of Americans call economic conditions good, while 59% call them bad. That’s despite the record 6.6 million jobs created last year and economic growth of 5.7%, its fastest pace since 1984. 

But when Americans are asked about rating the economy, their minds tend to go to their buying power:  CBS News found 73% are thinking about food and service prices, while 63% are thinking about gas prices, more than about either the jobs report or impact of the coronavirus pandemic on the economy. 

The White House has already taken several steps to try to help ease inflation — which Fed officials now do not expect to let up until the second half of this year, meaning it is likely to be a continuing issue for Americans ahead of the midterm election. 

Experts are skeptical about the effects of suspending the gas tax, saying that even if the government were able to do it, it would only provide very limited relief.

“It’s not going to do much to bring inflation down,” said Desmond Lachman, senior fellow at the right-leaning American Enterprise Institute. He said what the administration and Congress can do to tackle inflation is to cut spending or raise taxes to reduce demand and spare the Fed from having to raise rates as much, but such moves have no chance of happening. The Federal Reserve has signaled it would start raising rates next month, but the number of increases and rates still have to be determined. 

According to Howard Gleckman, senior fellow at the nonpartisan Tax Policy Center, suspending the federal gas tax would save Americans roughly $2 a week, an amount people would be unlikely to notice. 

“It’s a pretty bad idea,” Gleckman said, noting prices could spike later when the tax holiday ends, and it would put a “pothole in the Highway Trust Fund” which receives a large majority of its revenue from the gas tax.

While experts don’t anticipate a gas tax holiday would provide much relief for everyday Americans, it might not benefit people directly at all. The Committee for a Responsible Federal Budget warned much of the benefit of a gas tax holiday may flow to oil producers or lead to higher prices in other sectors. 

At the same time, there are other factors at play that could impact prices. If Russia were to invade Ukraine for example, experts say energy prices could shoot up anyway, even if a tax holiday were enacted.

But while Democrats consider their options, rising prices have left them vulnerable to attacks from Republicans who blame Democrats’ policies for inflation. Republicans on Capitol Hill seemed less enthusiastic about a gas tax holiday— calling it a ploy to distract from “reckless spending” by lawmakers across the aisle. Other Senate Republicans have argued Democrats actually want energy prices to go up, so people have to look for alternatives. 

Sara Cook contributed reporting.