Trump floats temporary US gas tax halt as pump prices soar

President Donald Trump voiced support for a gasoline tax holiday to counter rising prices at the pump, as the cost of oil soars while the war with Iran drags on.

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Trump told reporters at the White House that he’ll seek to suspend the federal 18.4 cents a gallon tax on gasoline “until it’s appropriate,” though it’s unclear how much of the tax cut would reach consumers at the pump. Pausing the tax would require an act of Congress.

Trump acknowledged the savings to consumers would be a fraction of the run-up in prices related to the conflict.

“It’s a small percentage but it’s still money,” Trump said.

The average national price for regular gasoline has surged since the U.S. and Israel attacked Iran in February, reaching $4.52 a gallon as of Sunday. The conflict has disrupted shipping through the Strait of Hormuz — through which about a fifth of the world’s oil and liquefied natural gas flowed before the war. 

Trump first broached the idea in a phone interview with CBS earlier in the day. Following the report, GOP Senator Josh Hawley of Missouri said Monday he would introduce legislation to suspend the gas tax. 

If supporters are successful, it’s unclear whether the temporary tax cut would significantly lower prices at the pump. A pause on the gas tax would likely lower prices between 10 and 16 cents a gallon, according to research from the Bipartisan Policy Center in April, citing estimates from the impacts of state-level gas tax suspensions in 2022.

“The pass-through is rarely complete,” said Andrew Lautz, director of tax policy at the Bipartisan Policy Center.

Compared to the $1.54-per-gallon increase in the average national cost of gasoline since the war started, a pause wouldn’t be a “massive improvement,” said Patrick De Haan, head of petroleum analysis at GasBuddy. The move would also likely keep consumers from cutting back as gasoline supplies dwindle, he said.

“This is like putting lipstick on a pig,” De Haan said. “The real problem remains unresolved.”

Trump is facing immense pressure to lower gasoline prices ahead of the midterm elections in November that will determine control of Congress. But like most presidents, he has few good tools at his disposal to tame surging prices.

In addition to tapping the Strategic Petroleum Reserve again, Trump could place export controls on oil and refined products like gasoline, though experts have cautioned that such measures likely would be limited in the relief they provide and could have unintended consequences. The White House has repeatedly signaled that such a move is off the table.

Meanwhile, gasoline stockpiles are near their 10-year lows seasonally, according to Department of Energy data. And in the Midwest, where pump prices have risen the fastest, supplies of gasoline are at their second-lowest seasonal levels ever.

Pausing federal gas tax collections could have devastating consequences for the Highway Trust Fund, which pays for the construction and repair of interstate highways, roads and bridges, unless lawmakers find a way to backfill the loss. The fund draws more than 80% of its funding from the gas tax and a 24.4 cents-per-gallon levy on diesel, according to the Tax Policy Center.

Georgia, Indiana and Utah have temporarily waived or lowered state gas taxes, in response to growing prices. Lawmakers in Alabama, New York, Pennsylvania and South Carolina have called for similar measures.

Indiana Governor Mike Braun announced an expansion of a gas tax holiday in his state last week.

Democratic Senator Mark Kelly of Arizona and Representative Brendan Boyle of Pennsylvania have also been pressing for a temporary halt to the federal tax. Kelly introduced a bill in March to suspend the federal gas tax through October 1.

Boyle, the top-ranking Democrat on the House Budget Committee, proposed suspending the tax any time average gas prices rise above $4 a gallon. He would backfill the Highway Trust Fund by diverting $30 billion in “existing federal subsidies” for oil and gas companies to the fund, which sends grants to state and local governments to pay for construction and repairs.

Recent efforts to suspend the gas tax have received little support in Congress. Then-President Joe Biden proposed a three-month suspension in 2022 to help offset a surge in oil prices following Russia’s invasion of Ukraine. Five states, including New York and Connecticut, suspended their gas taxes at the time.

But congressional leadership from both parties swiftly rejected Biden’s proposal, questioning how much it would lower prices for consumers. Democratic leaders, whose party controlled both the House and Senate at the time, dismissed the idea. Senator Mitch McConnell of Kentucky, then the top-ranking Republican in the Senate, called it a “silly proposal.”