WASHINGTON — Serious talk has begun in Washington and among governors about suspending the 18.4 cent a gallon federal gasoline tax this year.
Rep. Josh Harder, D-Turlock, calls doing so his top priority. Seven Democratic senators up for reelection are behind the idea.
The White House won’t rule it out. Asked if the administration was considering waiving the gasoline tax, Press Secretary Jen Psaki said “There are a range of options on the table.”
Democratic governors in Michigan, Minnesota, Pennsylvania, Colorado, New Mexico and Wisconsin wrote Tuesday to congressional leaders supporting a gas tax holiday.
Gasoline prices continue to soar. California’s average Wednesday was $5.69, according to AAA, far above the national average of $4.31. The Thursday average was up 12 cents a gallon from Wednesday and 75 cents from a week ago. The average price for a gallon of premium gasoline Thursday was $5.97.
Gov. Gavin Newsom said in his State of the State address this week that he’s working on a plan to provide some relief to motorists. Earlier this year, he proposed suspending the likely increase in the state’s gasoline tax.
The federal tax on gasoline has been 18.4 cents per gallon since 1993, and until now, many Washington lawmakers have for years been pushing to raise the tax.
The federal highway trust fund is supposed to pay for road and transit projects. Until 2008, the fuel tax as well as other highway revenue sources paid for such projects.
Gas tax trouble
Over the last several years, though, the tax has not produced enough money to cover costs, so general budget funds have been used for any shortfalls.
Washington has considered several alternatives, such as imposing a tax based on miles driven.
But with gasoline prices in California and elsewhere hitting record highs, lawmakers are now scrambling to find ways to ease the pain at the pump.
Harder’s plan, whose chief sponsor is Rep. Tom O’Halleran, D-Arizona, would suspend the tax this year. Sen. Mark Kelly, D-Arizona, and six other Democrats are pushing similar legislation in the Senate.
The bills would require the Treasury Department to monitor how oil and gas companies pass the savings to consumers, including encouraging what Harder called “appropriate enforcement actions to ensure consumers see these savings.”
He would replace the lost transportation revenue by requiring the government to transfer lost funding from its general fund.
Opposition to a tax holiday
The plan has attracted strong opposition and skepticism.
The American Association of State Highway and Transportation Officials and 23 other transportation interest groups sent a letter to congressional leaders opposing the tax suspension.
“While we understand the pain Americans are feeling at the pump and throughout the economy due to rising inflation, a gas tax holiday is not the answer to this problem,” the letter said..
It explained how there was no guarantee the lower tax would be passed on to consumers, and, they said, “There are many factors at play that will impact the price the consumer pays at the pump, including the cost of producing a barrel of oil. These costs fluctuate daily.”
Assuring the savings are passed on to consumers “is particularly unenforceable,” said Alex Muresianu, federal policy analyst at the Tax Foundation, a Washington research group.
“Even if savings were passed to consumers in the form of lower gas prices, it could make the misalignment between demand and supply worse,” he said, spurring more demand for gasoline and thus higher prices.
Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget, had the same thoughts.
She estimated that a gas tax holiday would cost the government $20 billion this year.
“The Highway Trust Fund is just five years from insolvency, and the last thing we need is to cut its primary revenue source or paper over shortfalls with yet another general revenue transfer,” she said.
But congressional supporters weren’t buying the idea that prices will go up.
“Temporarily stopping the gas tax will make the difference in what my constituents pay at the pump. It will also bring down the costs of groceries and other items,” said Rep. Lou Correa, D-Anaheim.
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