Congress Considers Suspending Federal Gas Tax as Prices Rise

The Labor Department reported Tuesday that inflation rose in April at the fastest pace in three years, driven by higher fuel and food costs. Gasoline now averages about $4.50 per gallon nationally. Trump told reporters he backed the suspension of the 18.4-cent-per-gallon federal tax on gasoline, stating that prices would eventually drop once the Iran War ends and the Strait of Hormuz reopens.

The extended closure of that shipping corridor, central to global oil supply, has disrupted markets. Lawmakers from both parties are now showing more interest in the idea than they did four years ago. At that time, lawmakers showed little support for a measure that would forgo revenue needed for roads and bridges in exchange for limited savings at the pump.

The current debate reflects shifting political views on affordability ahead of the midterms.

One bill introduced in March would suspend the federal gas tax through Oct. 1. A separate version introduced Monday by a Republican senator would last between 90 and 180 days and also cover diesel fuel. Senate Majority Leader John Thune said he had not historically supported suspending the tax because it would leave a big hole in the Highway Trust Fund.

Thune added that the best outcome for gas prices would be reopening the Strait of Hormuz. One senator described the new Republican interest as arriving late but welcome. Another said even modest relief at the pump could matter for families facing higher costs.

Suspending the tax would reduce the price of gasoline by 18.4 cents per gallon and diesel by 24.4 cents per gallon before market adjustments. The Bipartisan Policy Center estimated earlier this year that actual savings would likely range between 10 and 16 cents per gallon.

For a driver filling a 16-gallon tank, that would equal roughly $2 to $3 per fill-up. The Committee for a Responsible Federal Budget estimated that a one-month federal suspension would cost about $3.5 billion in lost revenue. A six-month suspension would cost roughly $21 billion and speed up the projected insolvency of the Highway Trust Fund.

The group said any consumer savings would likely be partly offset by higher pre-tax gasoline prices and broader inflationary effects. The federal gas tax has not been suspended since it was created in 1932. During the 2008 presidential campaign, then-Sen.

Barack Obama called a similar proposal a gimmick that would save the average driver about half a tank of gas over an entire summer. Some states, including Indiana, Georgia and Utah, have suspended or reduced their own gas taxes this year. The debate occurs as both parties seek to position themselves as addressing affordability.

Trump acknowledged the savings would represent a small percentage but said it is still money. Talks to reopen the Strait of Hormuz have produced little progress so far.