Will Biden's Gasoline Tax Holiday Gain Congress Support?

Will Biden's Gasoline Tax Holiday Gain Congress Support?
Fitch Solutions offers its view.

According to Dominika Rzechorzek, an oil and gas analyst at Fitch Solutions, the company sees a limited chance that U.S. President Joe Biden’s federal gasoline tax holiday will gain sufficient support in Congress.

“In our view, the proposal to suspend the federal gasoline tax will face substantial headwinds in Congress as a number of Republicans, joined by some Democrats, expressed opposition to this proposal,” Rzechorzek told Rigzone.

“The criticism has taken two forms. Some have suggested that the tax break is unlikely to significantly lower prices for consumers. Others have expressed concern over potential adverse impacts of the tax break on road and transport infrastructure projects in the U.S. as the federal gasoline and diesel taxes support the Highway Fund Trust, which sponsors road construction and mass transit maintenance,” the Fitch Solutions analyst added.

“Given that the federal gasoline tax holiday was not included in either of the bills passed recently by House Democrats, namely the Consumer Fuel Price Gouging Prevention Act and the Lower Food and Fuel Costs Act, we believe there is limited support from Biden’s party,” Rzechorzek continued. 

The analyst highlighted that the federal gasoline tax currently stands at $0.18 per gallon, which Rzechorzek noted is below fuel taxes imposed by a majority of the states, “ranging from the highest of $0.58 per gallon in Pennsylvania to the lowest at $0.09 per gallon for Alaska”.

“Although we do not expect the federal gasoline fuel tax to pass through Congress, we see some states providing temporary relief for consumers, in the form of suspension or reduction of state fuel taxes,” the analyst said.

“For example, states, including New York and Michigan, have announced plans to offer a suspension of fuel taxes starting ahead of the peak driving season,” Rzechorzek added.

“We note that any temporary fuel tax suspension, either at the federal or state level, would likely bring little relief to the consumers,” Rzechorzek continued. 

The analyst highlighted that the average U.S. gasoline price at the pump exceeded $5.00 per gallon in June and stated that, with this level of retail prices, suspension of the federal state tax would allow for a less than four percent drop in prices, “under the assumption that the entire reduction in taxes is passed on to the final consumer”.

“The suspension of state fuel tax would likely have a larger impact given the higher nominal level of state fuel taxes as compared to federal rates in the majority of the states,” Rzechorzek said.

“However, even in Pennsylvania, where the state gasoline tax is set at $0.576 per gallon, the tax suspension would reduce the price by less than 12 percent, assuming that the full reduction is passed on to the final consumer,” the analyst added.

“The price reduction caused by fuel tax suspension would provide little relief for final consumers, who in June 2022 saw retail prices lingering 93 percent above the average gasoline retail price in June for the last seven years,” the analyst went on to say.

In a White House speech on June 22, Biden called on Congress to suspend the federal gas tax and called on states to either suspend the state gas tax “or find other ways to deliver some relief”.

“I promise you I’m doing everything possible, everything possible, to bring the price of energy down, gas prices down, and I want to make sure we all work on this together,” Biden said in the speech.

To contact the author, email andreas.exarheas@rigzone.com



WHAT DO YOU THINK?


Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.


Most Popular Articles