WASHINGTON — President Biden plans to ask Congress on Wednesday to temporarily suspend the state gas tax in an attempt to stem soaring fuel prices that have sparked frustration across the United States.
During a speech Wednesday afternoon, Mr. Biden will ask Congress to repeal federal taxes — about 18 cents a gallon gasoline and 24 cents a gallon diesel — by the end of September, just before the midterm elections, according to the seniors’ anonymity. Officials will discuss the announcement Tuesday night and will speak on condition of anonymity. The president will also ask states to suspend their own gas taxes in hopes of easing economic pain that has contributed to the president’s waning popularity.
However, the White House will have to face an uphill battle to get Congress to approve the holiday. While the administration and some Congressional Democrats debated such a suspension for months, Republicans largely opposed it, accusing the administration of undermining the energy industry. Even members of Mr Biden’s own party, including spokeswoman Nancy Pelosi, have expressed concern that companies will absorb most of the savings, leaving little for consumers. Senator Joe Manchin III, a West Virginia Democrat, said this year that the plan “makes no sense.”
Mr. Biden will require companies to ensure consumers benefit from federal withholding taxes, officials said, though he did not specify how he might do so. The government estimates that the measures, along with a moratorium on state gas taxes and increased refining by oil companies, will reduce gas prices by at least $1 a gallon, although experts have questioned the effectiveness of the gas tax exemption. .
According to AAA, the national average for regular gasoline was $4.98 a gallon Monday, after rising more than $5 this month. Russia’s invasion of Ukraine and resulting sanctions and a rebound in energy consumption have pushed oil and refined fuel prices to 14-year highs as the economy recovers from the coronavirus pandemic. The White House has tried to blame Russia for rising prices, a tactic that has done little to quell American concerns.
Mr. Biden has also freed up strategic petroleum reserves and suspended a ban on summer sales of high-ethanol gasoline blends to try to offset a price hike at the pump, causing frustration among climate activists who still make Mr. Biden unhappy with the fallout from Biden’s climate and social spending. the package.
Economists have widely dismissed the idea of suspending the gas tax as ineffective and a waste of public funds. The reason? The state gas tax is now such a small part of the price at the pump, accounting for less than 5 percent of the total cost, that consumers may not even realize it.
“I don’t think it discourages people’s desire to buy more, and it doesn’t even save them a lot of money,” said Garrett Golding, an economist at the Federal Reserve Bank of Dallas. “It looks like something is being done to lower gas prices, but there isn’t much.”
Congress has not increased the state gas tax since 1993. But he never raised taxes. Taxes on gasoline and diesel now provide most of the federal funds used to build and maintain highways — $36.5 billion in 2019 — although spending has exceeded earmarked revenues in recent years.
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That means Mr Biden’s latest move to address a policy vulnerability could undermine funding for one of the legislation’s most important achievements during his tenure: investment in infrastructure.
Mr. Biden, who has been publicly debating the idea of a tax holiday for the past few days, attempted to address those concerns on Tuesday.
“Look, there will be some impact, but it won’t affect major road works and major repairs,” Mr. Biden told reporters. He said the administration has plenty of capacity to maintain the streets.
June 22, 2022 at 6:39 pm ET
The tax suspension would cost about $10 billion. Senior administration officials said Mr. Biden would require Congress to dive into other pots of money to make up for the loss, which he has done for years as gas tax revenues have not kept pace with highway construction and maintenance.
But with global oil demand and a fragmented market driving prices higher, experts have questioned how far the gas tax exemption will benefit consumers.
“Everything you thought about the merits of the gas tax exemption in February is a bad idea now,” said Jason Furman, chairman of the Council of Economic Advisors under President Barack Obama. Providing on Twitter, arguing that most of the oil industry’s savings will likely be pocketed.
Consider an average example: Even if all the benefits are passed on to consumers, the owner of a Ford F-150 driving 20 miles per gallon out of 1,000 miles per month could do so if the federal gas tax were suspended. Given that, that would be a savings of about $9 — the cost of a good ham sandwich these days.
Progressives and energy pundits have advocated alternative ways to cushion the gas price shock, or clinched some skyrocketing profits as oil companies and refiners continue to disrupt supplies. In her 2008 presidential campaign, when inflation-adjusted prices were reaching even higher levels, Hillary Clinton proposed linking the gas tax exemption to a levy on oil company profits.
But raising taxes is the most important of the federal government’s weak tools to lower gas prices.
“That’s what voters care about. That interests politicians,” said Erich Muhlegger, an associate professor of economics at the University of California, Davis. “Things like unexpected taxes on oil companies are politically attractive. That may be the case, but we don’t think they will have an immediate impact on gas prices.”
The research of dr. Muehleger has found that drivers tend to adjust their consumption to reflect changes in gas prices rather than market-based changes of a similar magnitude, which are caused in part by these changes in the media. Because of the attention of
States have more power to lower gas prices as their taxes and fees continue to rise, averaging 38.07 cents a gallon. To date, three states have passed and completed the gas tax exemption: Maryland, Georgia, and Connecticut. New York suspended its tax earlier this month and Florida will withdraw its tax for the month of October.
However, some gains are likely to benefit gasoline manufacturers and traders. An analysis by economists using the University of Pennsylvania’s Penn Wharton budget model showed that in states where gas price holidays have ended, between 58 and 87 percent of the suspended gas tax value has been passed on to consumers. , the rest was absorbed by the suppliers. A government suspension would be so brief that it could mask the volatile underlying oil price, which has fallen over the past week.
Mr. Biden also planned to target oil companies on Wednesday, urging him to expand refining capacity to cut costs at the pump, just days after benefiting from executives and “pain for consumers.” Alleged deterioration”. Even as refiners struggle to meet rising demand, refineries worldwide have added less than 1 percent of their capacity.
The administration can also expand refinery capacity by easing regulations that allow a site in St. Croix, in the Virgin Islands, that has a flawed environmental record to reopen. But that action is likely to meet a backlash from environmentalists, already dismayed at the brushing aside of some of the president’s big climate initiatives.
Michael K. Wirth, chief executive of Chevron, one of seven White House refiners called to a meeting this week to discuss price cuts, dismissed criticism of Biden on Tuesday. He said bringing down the high price of gas would require a “change in approach” from the government rather than just blaming the companies.
“I had no idea they would hurt her feelings so quickly,” Biden said. “Look, we need more solvency. The idea that they don’t have oil to drill and produce is not true.”