A Gas Tax Holiday Is Coming, Does That Mean Prices Will Go Down?
A gas tax holiday is about to be instated. Learn exactly what that is and whether or not that means gas prices will go down
This article is more than 2 years old
As gas prices around the world continue to reach ridiculous heights, President Biden has proposed a gas tax holiday to ease the burden on Americans’ wallets. While this may sound like a novel idea, it isn’t the first time the concept has been mentioned in politics. In 2008, John McCain and Hillary Clinton supported a similar plan amid rising fuel costs. But future President Barack Obama dismissed it as a political gimmick designed purely to win votes.
Now, 14 years later, President Obama’s former second in command is pushing for a gas tax holiday. Biden plans to ask Congress to suspend the federal gas tax for the next three months. According to NPR, that would mean the government would stop collecting the tax (18 cents per gallon on gas and 24 cents per gallon on diesel) until the end of September, the peak driving period for people heading out on summer vacations. The decision is seen as an aggressive and controversial effort to provide folks with immediate relief at the pump, as prices soar above $5 a gallon.
If Congress approves, a gas tax holiday would dull the strain plaguing consumers. Even if it is just a temporary fix. It would also be politically popular, allowing the White House to show that Biden is taking tangible action to address one of the biggest problems facing families. Additionally, the President plans to call on state governments to take similar action with their gas taxes, to give consumers relief. He also wants oil refiners to boost their capacity so there’s more gasoline on the market. This will serve as another way to bring down prices, ABC Eye Witness News reports.
However, not everyone shares an upbeat outlook regarding a gas tax holiday. Economists say the move might not make much of a difference to drivers and could harm the economy. “It would be very unlikely that gas prices would fall by more than a dime because of this change,” Jason Furman, who served as a top economic adviser to former President Barack Obama and is now at the Harvard Kennedy School told NPR. “And oil company profits would go up by billions of dollars,” he added.
Additionally, if the gas tax holiday encourages more spending, it could hurt the economy by providing a stimulus at a time when the government wants to curb inflation. Speaking about the idea, Associate Professor of Economics at Haverford College, Carola Binder said making gas cheaper doesn’t just allow people to buy more of it. “It’s giving them a tax cut and that gives them more to spend elsewhere. So that is going to lead to more inflationary pressures elsewhere,” she explained.
More concerning is that there’s no way to ensure the gas tax holiday savings would be passed through to consumers. There’s always a risk of middlemen pocketing the cash and leaving regular folks with no relief on their wallets. Interestingly, calls for the bold move come as Americans voice their dissatisfaction with President Biden’s handling of the economy. Republicans also blame him for high gas prices and exorbitant inflation – even though it’s a global problem. As such, Democrats are under pressure to do something significant heading into November’s midterm election.
