On Wednesday, June 22, President Joe Biden announced that he would be asking Congress to initiate a three-month gas-tax holiday in an effort to help consumers cope with gas prices that are currently sitting at a 14-year high. However, experts are skeptical about how effective a gas tax holiday would actually be at reducing costs for consumers.
The tax holiday would put a temporary pause on the federal government's collection of gas taxes equal to 18.4 cents per gallon of gas and 24.4 cents per gallon of diesel. The holiday would last for 90 days during peak summer travel and would come to an end in September, just before the midterm elections.
"I fully understand that the gas tax holiday alone is not going to fix the problem," Biden said during Wednesday's speech. "But it will provide families some immediate relief. Just a little bit of breathing room as we continue working to bring down prices for the long haul."
The tax currently goes towards maintaining the Highway Trust fund, and a 90-day holiday would mean a $10 billion loss for the fund. The Biden Administration has said that the shortfall would be covered but hasn't given any specific details on how.
"Look, it will have some impact, but it's not going to have an impact on major road construction and major repairs," Biden told reporters on Tuesday.
The Administration estimates that its combined efforts to combat high gas costs will reduce prices by $1 per gallon. However, economists aren't so optimistic: even if the entirety of the tax relief were passed onto the American consumer, it would save them less than 5% of their total gas costs. While the tax holiday might cost the fund $10 billion, that doesn't mean it would save the American people $10 billion.
"It would be very unlikely that gas prices would fall by more than a dime because of this change. And oil company profits would go up by billions of dollars," Jason Furman, top economic adviser to former President Barack Obama, told NPR.
If the gas tax holiday is effective and does save Americans money, it could still have a negative impact on the economy, according to associate professor of economics at Haverford College, Carola Binder.
"By making gas cheaper that allows people to buy more of it," Binder told NPR. "It's giving them a tax cut and that gives them more to spend elsewhere. So that is going to lead to more inflationary pressures elsewhere."
Congress isn't the only one Biden is asking to take action. Earlier this month, the President also slammed executives at the world's top oil refiners for profiting off the suffering of the American people.
"In the United States alone, oil refiners significantly reduced their capacity during the pandemic," Biden wrote in a letter to oil refiner executives. "I understand that many factors contributed to the business decision to reduce refinery capacity,... but at a time of war, refinery profit margins well above normal being passed onto American families are not acceptable."
In the letter, Biden called on the executives to do more to help combat high prices, specifically by increasing production. However, the execs claim they're already functioning at full capacity.
The President actually has very little control over gas prices, and there's very little that Biden can do beyond asking oil companies and other lawmakers to do more. However, Congress has never lifted the gas tax since its introduction, and some Democratic lawmakers, including House Speaker Nancy Pelosi, have said that a gas tax holiday would actually benefits oil companies more than everyday Americans.
"The question is," Pelosi previously said, "Is it worth having to go get money, to return to cover the shortfall and the trust fund, in order to get a break to the Big Oil companies?"
Still, voters are calling on their lawmakers to take action to bring down energy prices, and some lawmakers are supporting the gas tax holiday regardless of the fact that most see it as ineffective.
"I will keep pressing my colleagues in Congress to suspend the gas tax, and I continue to urge the president to take executive action to immediately lower families' energy costs," said Democratic Senator for New Hampshire, Maggie Hassan.