In an election year, President Biden is seeking to ease financial pressures at the pump by suspending federal gasoline and diesel taxes for three months. According to the White House, the president will also urge states to suspend their own gas taxes or provide similar relief for Americans. As of now, federal taxes on gasoline and diesel fuel amount to about 18.4 cents per gallon and 24.4 cents per gallon, respectively. In a nation where gas prices average about $5 a gallon, people would save approximately 3.6% if all gas savings were passed along to consumers. However, the idea of a gas tax holiday is viewed with much skepticism by many economists and lawmakers from both parties.
During the 2008 presidential campaign, former US president Barack Obama, called the gas tax holiday idea a “gimmick” that allowed politicians to “say they did something.” Additionally, he warned that oil companies could raise their prices to offset the tax relief. Amos Hochstein, the energy adviser for President Biden, argued that if Congress and the states heeded the president’s warning, consumers could save about 50 cents per gallon at the pump. Hochstein told CNN that, “That’s not a gimmick. That’s a little bit of breathing room for the American people as we get into the summer driving season.”
According to President Biden, the country still suffers some psychological effects from the Coronavirus pandemic, and they are now worried about how to afford gasoline, food, and other basics. In an interview conducted with the Associated Press, President Biden said, “If you notice, until gas prices started going up, things were much more, they were much more optimistic.”
As a result of the Russian invasion and continuing disruptions caused by the Coronavirus, Mark Zandi, chief economist at Moody’s Analytics, estimates that the bulk of the 8.6% inflation in the U.S. over the past 12 months is due to higher commodity prices. Zandi said last week, “In the immediate near term, it is critical to stem the increase in oil prices.” He suggested that Saudi Arabia, the United Arab Emirates, and a nuclear agreement with Iran may be able to boost supplies and lower inflation prices.