Congressional Hurdles
President Trump is advocating for a suspension of the federal gas tax in response to rising fuel costs during the war with Iran. The national average for regular gasoline is $4.52 per gallon, up from under $3 before the conflict. Suspending the 18.4 cent-per-gallon federal gas tax would require congressional approval.
Proposed Savings
Sen. Josh Hawley (R-Mo.) announced plans to introduce legislation to suspend the tax, which he says would save drivers 18.4 cents per gallon. Representatives Anna Paulina Luna (R-Fla.) and Jeff Van Drew (R-N.J.) also posted that they're introducing bills. Democratic Sens. Mark Kelly (Ariz.) and Richard Blumenthal (Conn.) have sponsored a bill to suspend the tax until Oct. 1, and Democratic Rep. Chris Pappas (N.H.) has a companion measure.
Limited Impact
Experts suggest the savings to consumers would be modest. Patrick De Haan, a petroleum analyst at GasBuddy, stated that the 18.4 cents "doesn't really amount to a whole lot." Andrew Lautz, director of tax policy at the Bipartisan Policy Center, estimates a California driver with an SUV could save between $2.36 and $3.09 per fill-up, but would still pay roughly $24 to $32 more per tank since the war began.
Highway Trust Fund Concerns
Suspending the gas tax could negatively affect the Highway Trust Fund, which relies on gas tax revenue to fund highway and mass transit projects. One estimate put the cost of a gas tax holiday at a minimum $2.5 billion per month. The suspension would cost the federal government about $2.1 billion a month in lost revenue, according to De Haan.
State Actions
Some states have already suspended their gas taxes. Indiana is seeing motorists getting a nearly 60 cent per gallon discount. Taxes and fees range from 27 cents per gallon in Alaska to 89 cents per gallon in California.
Demand Imbalance
De Haan suggested that reducing gas taxes may worsen the imbalance between supply and demand. He noted that politicians risk stimulating demand instead of disincentivizing it. The war in Iran has stalled the passage of oil tankers through the Strait of Hormuz, which usually carries one-fifth of the world's crude oil.
Iran Ceasefire Rejected
Trump rejected Iran's response to a U.S. peace proposal, calling it "totally unacceptable." Iranian state media reported the Iranian response focused on ending the war and enshrining guarantees it won't resume, before anything else. Iran demanded an immediate end to the U.S. naval blockade upon signing, according to the Tasnim news agency.
Global Impact
Prime Minister Narendra Modi is asking Indians to work from home more and make a series of changes in their consumption habits, including cutting down on foreign trips and buying gold jewelry. Fertilizer producer Mosaic Co. is temporarily taking nearly two million tons of US phosphate production off the market.
With gas prices straining the budgets of eight in 10 Americans, consumers can use Lautz's tax calculator to estimate their individual fuel savings.
