President Donald Trump said he intends to suspend the federal gas tax as part of a move to curb high prices at the pump.
“Yeah, I’m going to reduce,” Trump said Monday in the Oval Office in response to a question about suspending the tax.
He said he would suspend the tax “until it’s appropriate. It’s a small percentage, but it’s still money.”
The president told CBS News he would phase the tax back in “when gas goes down.”
The move would require an act by Congress to suspend the federal taxes of 18.4 cents per gallon on gas and 24.4 cents per gallon on diesel. Tax revenue primarily funds federal highway and public transit programs.
Sen. Josh Hawley (R-MO) on Monday indicated that he plans to introduce a bill to suspend the gas tax.
Democrats in Congress proposed a bill in March to temporarily suspend the gas tax to provide relief to consumers. Former President Joe Biden also previously called for a three-month pause in the federal gas tax in 2022 as prices soared due to Russia’s invasion of Ukraine.
Gas prices have soared nearly 50% since the war in Iran started in late February. As of Monday, the national price of gas is about $4.52, according to AAA.
Yet it is not clear that suspending the federal gas tax will help to ease prices.
Economists generally say that producers, rather than drivers, might benefit from suspending the tax. That would be the case if driver demand is what economists call “inelastic,” meaning that they do not drive less as prices go up. Many families cannot cut back much on driving because they need to get to work or school, meaning that they simply pay more in gas costs rather than cut back on trips when prices go up.
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According to a 2022 report by the University of Pennsylvania, about 80% of the tax burden falls on consumers, resulting in 80% of a tax decrease being passed on to consumers in lower prices. Consumers could see almost a 15-cent decrease per gallon. It added that gasoline demand would likely increase because of these lower prices.
During his 2024 campaign, Trump vowed to lower gas prices for Americans to below $2 per gallon. The Trump administration has attempted to ease the high prices by reducing regulations, adjusting sanctions, and emphasizing domestic production.