Biden’s proposed ‘gas tax holiday’ runs into opposition

Joe Biden’s call for Congress to suspend the federal tax on petrol and diesel for three months ran into swift opposition in a blow to the president’s efforts to provide some temporary relief to American households grappling with high inflation.

The so-called gas tax holiday proposed by the US president would involve scrapping the 18.4 cent federal levy on every gallon of petrol and the 24 cent levy on diesel that consumers pay at the pump.

The total cost of the measure would be approximately $10bn. Biden is asking Congress to replenish the highway trust fund, which is normally funded by those taxes, with other revenue increases.

“It doesn’t reduce all the pain, but it would be a big help. I’m doing my part. I want the Congress, the states and the industry to do their part as well,” Biden said in remarks from the White House on Wednesday afternoon.

Some states, including New York and Florida, have taken steps to suspend their own state petrol taxes and offer drivers relief from high prices. But Biden is facing an uphill battle to get the measure passed at a federal level on Capitol Hill, as Republicans balked and Democrats were chilly to the proposal.

“What the administration, of course, is coming up with is yet another gimmick, another Band-Aid and something they know is dead on arrival up here in Congress,” John Thune, the Republican senator from South Dakota, told reporters.

“Although well-intentioned, this policy would at best achieve only minuscule relief while blowing a $10bn hole in the highway trust fund,” said Peter DeFazio, the Oregon Democrat and chair of the House transportation committee.

Tom Carper, the Democratic senator from Delaware, had been even more blunt on Twitter on Tuesday evening. “I’m glad that @POTUS is exploring ways to lower gas prices at the pump. Still, suspending the primary way that we pay for infrastructure projects on our roads is a shortsighted and inefficient way to provide relief. We should explore other options for lowering energy costs,” he wrote.

Biden’s call for a gas tax holiday marks the latest effort by the White House to show its determination to do everything it can to tame inflation and bring down energy costs as the war in Ukraine drags on. Biden on Wednesday lashed out at critics who said his policies had stoked inflation, saying they failed to recognise that Russia’s invasion was a big driver of the price increases.

“So for all those Republicans in the Congress criticising me today for high gas prices in America, are you now saying we were wrong to support Ukraine?” Biden said. “Are you saying we were wrong to stand up to Putin? Are you saying that we would rather have lower gas prices in America and Putin’s iron fist in Europe? I don’t believe that.”

In recent months, Biden released oil from the strategic petroleum reserve, nudged domestic energy groups to increase production, and is to travel to Saudi Arabia for talks with a regime he once promised to make a “pariah”.

As petrol costs have soared to about $5 per gallon, the suspension of the federal tax would only offer a minor reprieve to struggling consumers. Consumer prices rose at an annual rate of 8.6 per cent last month, souring Americans’ perceptions of the strength of the US recovery.

Biden considered a gas tax holiday in February but decided against it. Critics have warned that the policy could backfire, boosting demand and contributing to inflation, while failing to provide meaningful relief to families.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a non-partisan think-tank in Washington, said a petrol tax holiday “would modestly reduce prices at the pump but exacerbate overall inflationary pressures and increase demand for an energy source already short in supply”.

Oil executives are likely to welcome the move, which amounts to a subsidy for their product. Executives from some of the US’s largest oil and fuel producers will meet energy secretary Jennifer Granholm on Thursday.

But high fuel prices have deepened tensions between Biden and oil industry executives. On Tuesday, he lashed out at Chevron chief executive Mike Wirth after he said in a letter to the president that a “change in approach” was needed to bring down prices and that the administration should not “vilify” the industry.

Biden called Wirth “sensitive”, while urging the industry to increase fuel supply.