Time for a Federal Gas Tax Holiday?

Senate Democrats introduced legislation to lower gas prices by suspending the federal gas tax through the end of the year. General funds would be directed to the Highway Trust Fund to replace gas tax revenue.

3 minute read

February 15, 2022, 11:00 AM PST

By Irvin Dawid


Pumping Gas

futureatlas.com / flickr

"The Gas Prices Relief Act, introduced by Sens. Mark Kelly of Arizona and Maggie Hassan of New Hampshire, would eliminate the federal gas – which has remained at 18.4 cents per gallon since 1993 – for the remainder of the year," reports Megan Henney for FOX Business on February 9. "Although four other Democrats signed onto the bill, it still faces an uphill battle in the 50-50 Senate."

The federal gas tax is used to pay for the Highway Trust Fund, which covers expenses like highway construction and public transit. The bill would require the Treasury Department to deposited [sic] general funds into the trust fund to make up for the lost tax revenue and to ensure the fund remains solvent. It could require further borrowing. 

In other words, the Gas Tax Relief Act increases subsidies for driving by suspending a road user fee and replacing it with general funds in order to ostensibly reduce the price of gasoline by 18.4 cents per gallon.

For months, the prices of all kinds of energy – gasoline, diesel fuel, natural gas, oil and more – have been a major driver behind inflation, which surged 7% in December, the highest level since 1982. Energy costs have climbed more than 29% over the past year, in part due to lopsided supply and demand. Consumers are traveling more, but the supply side has not kept up with the demand. 

The bill is "co-sponsored by Senators Debbie Stabenow (D-MI), Catherine Cortez Masto (D-NV), Raphael Warnock (D-GA), and Jackie Rosen (D-NV)," according to Sen. Kelley's press release. The Associated Press agreed with Henney of Fox Business in reporting on February 9 that "the bill faces an uphill fight to become law."

The 4-page Senate bill [pdf ] has not yet been assigned a number. 

Championed by California Congressional Democrat

The idea of suspending the gas tax as a strategy to reduce driving costs appears to have originated with Rep. Josh Harder, who represents the 10th congressional district, part of the northern San Joaquin Valley, as his Feb. 9 press release indicates:

For months, Rep. Harder has been leading the charge on the state and federal level to address the price of gas. In his December op-ed in Fox BusinessI'm a Democrat and it's time for our government to stop making gas more expensive, Harder called for elected representatives across the country to halt their gas taxes while gas prices remain at all-time highs. Soon after Rep. Harder’s push, Governor Newsom announced a proposal for a gas tax ‘holiday’ which would save California families $523 million this year. 

Harder noted that Newsom endorsed suspending an increase in the Senate Bill 1 (2017) legislation that calls for annual inflation adjustments to the gas tax.

Infrastructure Investment and Jobs Act

Harder also viewed the bipartisan infrastructure law (Infrastructure Investment and Jobs Act or IIJA) as a form of double taxation in his Fox Business opinion on December 8. Referring to state and federal gas taxes, he wrote:

These taxes are supposed to go toward fixing our roads and bridges, but here’s the kicker: our families are getting taxed twice at the pump for a service -- rebuilding our infrastructure -- they’re only getting back once. 

The IIJA does not hike any taxes. It never proposed increasing the gas tax but did include a bipartisan provision to adjust the federal gas tax to inflation which was removed at the insistence of President Biden.

Gas tax holidays

Gas tax holidays have been used as a political ploy before, most notably in the 2008 Democratic presidential primary campaign between Hillary Clinton and Barack Obama.

H.R.3752, the Gas Price Relief Act of 2005, was introduced by Sen. Robert Menendez (D-N.J.). Unlike the current Gas Prices Relief Act, Menendez proposed having the oil companies rather than U.S. taxpayers pay for a 10% reduction in "highway motor fuels" for one year. The bill died shortly after introduction.

The final word goes to Harder, who made the progressive case in his Fox Business opinion to suspend gas taxes.

Gas taxes hurt our families and our economy while penalizing folks who are just trying to get by. 

Wednesday, February 9, 2022 in Fox Business

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