Biden pushes Congress for a three-month gas tax exemption

WASHINGTON – President Biden called on Congress on Wednesday to temporarily suspend the Federal gas taxan attempt to give Americans “a little breathing room” from rising fuel prices even as economists and lawmakers in both parties expressed doubt that the move would make much of a difference.

During an afternoon speech by Biden, Mr. Biden asked Congress to raise federal taxes — about 18 cents per gallon of gasoline and 24 cents per gallon of diesel — through the end of September, shortly before the fall midterm elections. The president has also asked states to suspend their gas taxes, hoping to ease the economic pain that has contributed to his shrinking popularity.

“I fully understand that the gas tax credit alone will not solve the problem,” Biden said. But it will provide families with some immediate relief. Just a little breathing room as we continue to work to bring prices down over the long term.”

But the White House faces an uphill battle to get Congress to approve the recess. While the administration and some Democrats in Congress have had it for months Discuss such a commentRepublicans widely oppose it and accuse the administration of undermining the energy industry. Even members of Mr. Biden’s party, including House Speaker Nancy Pelosi, have expressed concern that companies will absorb too much of the savings, leaving little for consumers.

Senator Mitch McConnell of Kentucky, the Republican leader, quickly rejected the president’s call to suspend the tax. “This administration’s big new idea is a ridiculous proposal that senior members of his party were already dropping early on,” he said.

Mr. Biden said he wants to ensure consumers benefit from the federal tax halt. The administration estimates that the combination of several potential steps — a suspension of the tax, a moratorium on state taxes on gas and an increase in refining capacity by oil companies — would lower gas prices by at least $1 a gallon.

But critics have questioned the effectiveness of the gas tax credits, dismissing the idea as little more than a desperate attempt by the White House and weak Democrats to show that the party cares about Americans’ financial pain.

Economists and some members of Congress have criticized the idea of ​​suspending the federal gas tax as a wasteful move for the government, given the revenue that would be sacrificed in an effort to provide only a light dose of relief to consumers. Its impact on them would be so limited: The tax is now a tiny slice of the price at the pump, coming in at less than 5 percent of the total cost, that Americans might not even notice its absence.

“I don’t think that drives the will about people wanting to buy more, and it also doesn’t save them a lot of money either,” said Garrett Golding, business economist at the Federal Reserve Bank of Dallas. “It looks like something is being done to bring gas prices down, but there’s not much there.”

This year, oil and refined fuel prices have soared to their highest levels in 14 years due to the Russian invasion of Ukraine, sanctions against President Vladimir Putin, and a rebound in energy use as the United States recovers from the coronavirus pandemic. The White House has increasingly tried to shift the blame for rising prices toward Russia, a The Strategy That Didn’t Do Much To Calm Anxiety among Americans. The national average for regular gasoline was $4.95 a gallon on Wednesday, according to AAA, after hitting $5 this month.

Biden also issued strategic oil reserves and suspended a ban on summer sales of high-ethanol blend gasoline in a bid to mitigate price hikes, frustrating climate activists who remain unhappy with the collapse of the president’s climate package and social spending.

Congress hasn’t increased the federal gas tax since 1993. But it hasn’t raised the tax either. Taxes on gasoline and diesel now provide the majority of federal funding used to build and maintain highways. $36.5 billion in 2019 – Although expenditures have exceeded allocated revenues in recent years.

That is, Mr. Biden’s latest move to address a political vulnerability could undermine funding for a key legislative achievement during his time in office: infrastructure investments.

“I haven’t relaxed the gas tax because of the infrastructure implications there,” Senator Shelley Moore Capito, Republican of West Virginia, said Wednesday.

But, she added, one of the most common questions she hears from voters is: What about my gasoline?

“I think it’s a temporary solution,” Ms. Capito said. “But yeah, people were saying, ‘Do something. “

Senator Rick Scott of Florida, chair of the Senate’s Republican campaign arm, wondered where the federal government would find the revenue normally generated from a gas tax that supports the construction of roads, bridges and other infrastructure projects in his state.

“What expenses are we going to cut?” He said, adding that the tax suspension proposal showed that “Democrats know they are in deep trouble.”

Mr. Biden sought to allay those concerns on Tuesday.

“Look, it will have some impact, but it will not have an impact on the construction of major roads and major repairs,” he told reporters, adding that the administration has a lot of work to do. Road maintenance ability.

The tax suspension would cost about $10 billion. Senior administration officials said Biden would ask Congress to dig into other funds to recoup losses.

But at a time when global demand for oil and a market crash have sent prices up, experts have questioned how useful the gas tax credit would be for consumers.

“Regardless of the benefits of the gas tax credit in February, it’s a worse idea now,” said Jason Furman, chair of the Council of Economic Advisers under President Barack Obama. Posted on Twitterarguing that the oil industry is likely to get the most savings.

For example, even if all the benefits were passed on to consumers, the owner of a Ford F-150 that gets 20 miles per gallon that drives a thousand miles per month would save about $9 if the federal gas tax was suspended.

Progressives and energy experts have called for alternative methods smooth out gas price shocks or Suction Some inflated profits were reaped by oil companies and refineries while supply remained restricted. In her 2008 presidential campaign, with inflation-adjusted prices approaching a higher point, Hillary Clinton Suggestion Pair a gas tax holiday with a tax on oil company profits.

But among the limited tools the federal government has at its disposal to lower gas prices, raising taxes could resonate most with Americans.

This is what voters care about. “It’s something that politicians care about,” said Eric Mulliger, associate professor of economics at the University of California, Davis. Things like an unexpected tax on oil companies may be attractive from a political point of view, but we don’t necessarily think it will have an immediate impact on gas prices.

Dr. Mulliger Research It found that drivers adjust their consumption more in response to changes in gas prices than they do to market changes of the same magnitude, in part due to the media interest generated by these changes.

Senator Maggie Hassan, a Democrat from New Hampshire, who is facing a difficult re-election bid, said Mr. Biden will need to do more to provide comfort to voters. She said in a statement that the White House should move forward with suspending the gas tax for the rest of the year, rather than just three months.

“I will continue to pressure my colleagues in Congress to suspend the gas tax, and I will continue to urge the president to take executive action to reduce energy costs for households immediately,” she said.

States have more power to lower gas prices, as their taxes and fees are rising steadily, to about 38 cents a gallon on average. Three states have so far passed and completed gas tax exemptions: Maryland, Georgia, and Connecticut. New York suspended Its taxes at the beginning of this month, Florida will raise Its tax for the month of October.

However, gasoline producers and retailers are likely to reap some benefits. that Analytics By economists with the University of Pennsylvania’s Ben Wharton budget model, he showed that in states where the gas price holidays have ended, between 58 percent and 87 percent of the value of the pending gas tax has been passed on to consumers, with suppliers absorbing the rest. The Fed’s comment will be so much smaller that it may be overshadowed by the volatile base price of oil, which has fallen over the past week.

Biden also plans to target oil companies on Wednesday, asking them to expand refining capacity to cut costs at the pump, just days later. CEOs accused of profiteering And “exacerbate the pain” of consumers. Even as refineries struggle to keep up with rising demand, refineries have added less than 1 percent to their worldwide capacity.

Emily CochranAnd the Katie Edmondson And the Stephanie Lay Contribute to the preparation of reports.