On Monday, President Donald Trump said in Oval Office remarks that he would “reduce” the tax, after saying in an interview with CBS News that he wants to pause it “for a period of time.”
The taxes and other fees on retail gasoline and diesel fuel are 18.4 cents per gallon for gas and 24.4 cents per gallon for diesel, according to the U.S. Energy Information Administration.
Reducing or pausing the federal gas tax would require congressional approval, but several Republican lawmakers immediately advanced proposals to do just that on the heels of Trump’s remarks.
“American workers and families deserve immediate relief and this legislation will do just that,” Hawley said in a statement.
In an X post the same day, Rep. Anna Paulina Luna, R-Fla., also said she plans to introduce a House bill this week to suspend the federal gas tax.
Shortly after the Iran war started, Sens. Mark Kelly, D-Ariz., and Richard Blumenthal, D-Conn., in March unveiled legislation to temporarily suspend the federal gas tax through Oct. 1. But the bill hasn’t cleared the Senate Finance Committee.
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The proposals come as Americans prepare for the busy summer travel season. Typically, retail gasoline prices rise in the spring and peak during late summer as demand soars, according to the U.S. Energy Information Administration.
But suspending the federal gas tax may only provide modest relief at the pump while creating longer-term fiscal challenges, some policy experts say.
“This is a problem without an easy, short-run solution,” said Adam Hoffer, director of excise tax policy for the Tax Foundation.
The White House and Sen. Hawley’s office did not respond to CNBC’s requests for comment.
What is the federal gas tax?
Under current law, consumers pay 18.4 cents per gallon in federal taxes and other fees for gas and 24.4 cents per gallon for diesel.
State tax rates are levied in addition to the federal tax and vary from about 9 cents per gallon in Alaska to about 71 cents in California, according to the Tax Foundation. As of May 12, several states — including Georgia, Indiana, Kentucky and Utah — have taken steps to offer state gas tax relief.
Suspending the federal gas tax alone for a period could provide consumers with “very modest relief,” said Mark Zandi, chief economist at Moody’s.
“It is 18 cents, and after retailers and distributors take their cut, it could be closer to 10 to 12 cents,” he said.
“Americans would take it, but it’s really on the margin,” Zandi said. “I think it would be a welcome relief, but very modest and temporary.”
Gas prices are up 50% since the war with Iran began on Feb. 28. The national average for a gallon of gas is $4.50 as of Tuesday, according to AAA.
The sudden spike in oil prices and products refined from oil, such as gasoline, have rippled through the economy and strained household budgets, hitting low-income families especially hard, other data shows.
Surging gas prices due to the Iran war caused consumer sentiment to sink to a new low in May, according to the University of Michigan’s closely watched Survey of Consumers.
‘The fiscal costs are real’
Federal gas taxes also fund highway construction and maintenance.
“This is a relatively minor relief, but the fiscal costs are real,” said Hoffer with the Tax Foundation.
While the federal gas tax brings in billions of revenue per year, the Highway Trust Fund has increasingly struggled to cover the growing cost of federal infrastructure projects, he said.
“That fund is substantially underwater when it comes to being able to finance all of its own projects,” Hoffer said.
Any consumer benefit may be offset by the risk to these essential services, according to certified financial planner Stephen Kates, a financial analyst at Bankrate.
A gas tax suspension “would undoubtedly help consumers in the short term by immediately lowering prices at the pump,” Kates said. “However, it would also negatively affect the tax revenue used for road repairs and other services funded by the gas tax.”
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