In an effort to reduce financial strains at the pump, President Joe Biden will ask Congress to suspend federal gasoline and diesel taxes for three months on Wednesday. However, this measure also highlights the political toxicity of high gas prices during an election year.
According to the White House, the Democratic president will also urge the states to suspend their own gas taxes or offer a comparable reprieve.
The federal gas tax of 18.4 cents per gallon and the federal diesel tax of 24.4 cents per gallon are in contention. People would save about 3.6 percent at the pump at a time when national average gas prices are around $5 per gallon if the gas savings were fully passed through to consumers.
However, a lot of economists and MPs from both parties are sceptical of the idea of a gas tax holiday.
Barack Obama described the concept as a ‘gimmick’ that allowed politicians to ‘claim that they done something’ during the 2008 presidential campaign. He also issued a warning that oil corporations would raise their prices to make up for the tax break.
Gas price increases are a serious danger to Biden’s political aspirations. They have lowered economic confidence to record lows, which portends poorly for retaining Democratic control of the House and Senate in November.
There is a risk associated with the idea of a gas tax holiday because Biden’s previous efforts to lower gas costs, including as the release of oil from the American strategic reserve and increased ethanol blending this summer, haven’t led to significant savings at the pump.
When trying to persuade people that the U.S. can still make the transition to a clean-energy future, Biden has acknowledged how rising gas prices have sapped public enthusiasm. Biden characterised a nation that was already dealing with the psychological effects of the coronavirus pandemic and is now concerned about how to pay for transportation, food, and other necessities in an interview with The Associated Press last week.
As Biden pointed out, ‘things were much more, they were much more positive until gas costs started going up.’
The president has very little power to influence pricing, which are determined by world markets, profit-driven businesses, consumer demand, and the ripple effects of Russia’s invasion of Ukraine and the ensuing embargoes. The main issue is a shortage of gas-producing refineries and oil, which cannot always be resolved by a tax vacation.
According to Mark Zandi, chief economist of Moody’s Analytics, increased commodity prices brought on by Russia’s invasion and ongoing coronavirus disruptions account for the majority of the 8.6 percent inflation experienced in the U.S. during the past 12 months.
Zandi stated last week that it was crucial to stop the rise in oil prices in the near future and that Saudi Arabia, the United Arab Emirates, and a nuclear agreement with Iran could all contribute to increased supplies and reduced prices.
Republicans in Congress have attempted to place extra blame on Biden by claiming that by making the climate inhospitable for domestic oil producers, their output remained below pre-pandemic levels.
In a speech in February, Senate Republican leader Mitch McConnell made fun of the idea of a gas tax holiday. He declared, ‘They’ve waged a holy war on affordable American energy for an entire year, and now they want to use a tonne of taxpayer money to cover the repercussions.’