Calls for gas tax suspensions grow as Americans struggle with high prices

With gasoline prices hovering near $4.50 a gallon amid the Iran war, calls to suspend federal and state gas taxes are gaining momentum.

Multiple states, including Indiana and Georgia this week, have either suspended or reduced their own fuel taxes to ease prices at the pump elevated by the seven-month conflict.

Georgia Gov. Brian Kemp (R), in suspending his state’s 33.3 cents per gallon gas tax and 37.3 cents per gallon diesel tax for 30 days, said the move is intended to give “relief” to Georgians.

Some lawmakers and candidates are also calling for a suspension of the federal fuel taxes. Both Michigan Senate nominees, Abdul El-Sayed (D) and former Rep. Mike Rogers (R) have said the taxes should be paused.

Similarly, in Texas, Democrat James Talarico has said federal gas and diesel taxes should be suspended, while Republican Ken Paxton says lawmakers should repeal the gas tax entirely.

This week, Sen. Mark Kelly (D-Ariz.) and Rep. Chris Pappas (D-N.H.), the latter of whom is running for the Senate in a tight race, introduced a bill to pause federal gas, diesel and aviation fuel taxes. Earlier this year, the pair introduced a separate bill that aimed to suspend the gas tax through Oct. 1.

The federal gas tax adds about 18 cents per gallon to the cost of the fuel, while state gas taxes add an average of 33 cents.

Rep. Andy Harris (R-Md.) recently pushed to suspend the federal gas and diesel taxes, but his effort ultimately flopped.

“Once again the swamp stopped the effort. They never met a tax they didn’t like, no matter how painful for Americans at this time,” Harris’s office said via email.

Regarding a fuel tax suspension, Speaker Mike Johnson (R-La.) said at the time, “I don’t know that we have consensus around what that would look like,” according to Politico.

“There were about five or six different ideas on it. There will be a number of measures in the days ahead, working to lower gas prices as much as possible. Of course, there’s many factors in why gas prices are so high,” Johnson added.

The pushes to suspend the taxes come as the national average gasoline cost was $4.43 cents per gallon on Wednesday, according to AAA.

That price, largely driven by energy shocks from the Iran war, is unusually high in general, but especially at this time of year, as fuel costs typically decline in the autumn after summer holidays.

But experts say suspending the federal gas tax could create headaches for the U.S. government, considering the levies fund the maintenance of highways.

“From a public finance perspective, it’s less than ideal because you’re not funding transportation from the users of the transportation infrastructure,” said Adam Hoffer, the director of excise tax policy at the Tax Foundation.

Yonah Freemark, a principal research associate at the Urban Institute, said a suspension of federal fuel taxes would have a “pretty minimal” impact on prices at the pump.

That is particularly the case, Freemark said, when accounting for the fact that gas stations might not pass off the entire suspended tax to consumers.

“There’s absolutely no requirement” for them to do so, he told the Hill.

“They could take off 10 cents. It depends on what is going [on]… around them,” Freemark added. “That’s the reality about gas prices, is that they sit on a market, and the market is determined by the competition.”

While Hoffer estimated that consumers would receive at least 80 percent of the savings from a gas tax suspension, he noted drivers would only save “cents, not dollars” per gallon.

Fuel prices are elevated because of global conflicts including the war in Iran, which has led to energy infrastructure and shipping disruptions. Commodities traders are also increasingly worried that the conflict will not come to an end anytime soon.

The Russia-Ukraine war is also a factor in high prices, as Ukraine’s attacks on Russian refineries reduce global supply of refined fuels, a category that includes both gasoline and diesel.

Calls for a gas tax holiday are not new. While campaigning for president in 2008, then-Sen. Hillary Clinton (D-N.Y.) backed a suspension of the tax, putting her at odds with then-Sen. Barack Obama (D-Ill.).

When prices were high in 2022, driven up by Russia’s invasion of Ukraine, similar pushes for a gas tax holiday occurred, with several vulnerable lawmakers backing the idea.

High fuel prices pose a political problem for all incumbents, but particularly those associated with the party in power. And as President Trump launched the war in Iran, high prices are likely to be particularly troublesome for Republicans in November.

But while lawmakers and candidates alike have proposed a quick-fix gas tax suspension, the move would come with negative downstream effects, analysts say.

Hoffer argued a suspension or repeal of the tax would “create a real fiscal problem” for the Transportation Department’s Highway Trust Fund, which relies on revenue from the gas tax.

That fund, Hoffer said, has recently “been running deficits.” A gas tax suspension, therefore, would lead to the federal government dipping into other pots to pay for transportation infrastructure.

“It becomes problematic if the way that we’re going to fund this gas tax relief is to increase the annual deficit, which would … just translate into more borrowing,” Hoffer added.

Freemark said, “We have a highway trust fund that’s absolutely broke, and what folks are proposing will, crazily enough, make that situation even worse.”

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