While President Joe Biden is calling for Congress to suspend federal gasoline and diesel taxes for three months, analysts are predicting that U.S. lawmakers won’t deliver on that front.
Suspension “would require Congressional action, which is exceedingly unlikely,” said Tobin Marcus, a policy and politics strategist at Evercore ISI, in a note on Wednesday.
The rollout of a “politically oriented proposal that will not get enacted reinforces our belief that the White House sees little genuinely impactful that they are willing and able to do unilaterally on energy prices or inflation more broadly,” added Marcus, who worked as a Biden economic adviser when the veteran politician was vice president.
“We continue to get questions from investors about how Democrats will respond to inflation before the midterms, and this announcement suggests that few new ideas are forthcoming.”
An analyst at Height Capital Markets also was downbeat on the prospects for a gas tax holiday in the House and Senate. Biden’s Democratic Party controls both chambers, but just barely.
“The gas tax holiday is unlikely to pass but highlights future risk,” said Benjamin Salisbury, director of research at Height Capital Markets.
“Although the Administration has thus far resisted the urge for more invasive interventions such as a summertime fuel formulation waiver, Jones Act waiver, Windfall Profits Tax or crude and/or product export ban, its willingness to push against senior Democratic leadership shows the urgency for the White House to be seen as responding to prices, which raises the risk that these policies come into play if political and/or price pressure deepens,” Salisbury added.
“We anticipate the president will continue to try to jawbone down prices, including pressure on oil producers and refiners, with low-probability, high-impact risk of executive action if the situation worsens.”
Top Democratic lawmakers have sounded skeptical about a gas tax holiday.
Democratic Rep. Peter DeFazio of Oregon, the chairman of the House Transportation and Infrastructure Committee, said in a statement on Tuesday that it’s a “short-sighted proposal that relies on the cooperation of oil companies to pass on miniscule savings to consumers.”
The federal tax on gasoline
is 18.4 cents per gallon, while the federal levy on diesel is 24.4 cents per gallon.
“Suspending the federal gas tax will not provide meaningful relief at the pump for American families, but it will blow a multi-billion-dollar hole in the highway trust fund putting funding for future infrastructure projects at risk,” added DeFazio, who isn’t seeking reelection.
“We should deliver relief directly to American families struggling to make ends meet by ending price gouging and profiteering, not by passing a well-intentioned but ill-conceived policy that undermines the long-term positive impacts of the Bipartisan Infrastructure Law. That’s why I introduced the Stop Gas Price Gouging Tax and Rebate Act, which would tax the oil industry’s obscene 2022 profits and return the revenue back to Americans,” the Oregon lawmaker also said.
In late April, House Speaker Nancy Pelosi, a California Democrat, made a similar point, saying there was “no guarantee” that companies would pass on the savings to consumers, and the resulting shortfall in the Highway Trust Fund would have to get covered with other funding.
Biden on Tuesday addressed how a gas tax holiday would make it difficult to pay for major infrastructure
“We have plenty of capacity to do that,” Biden said, referring to funding road construction.
A White House statement on Wednesday said he’s “calling on Congress to make sure that a gas tax holiday has no negative effect on the Highway Trust Fund.”
“With our deficit already down by a historic $1.6 trillion this year, the President believes that we can afford to suspend the gas tax to help consumers while using other revenues to make the Highway Trust Fund whole for the roughly $10 billion cost,” the White House said.
The president is slated to deliver a speech on his call for the gas tax holiday at 2 p.m. Eastern.
“There are many reasons why this is a bad idea, but the major flaw is that it has very little chance of winning enactment. Republicans are dismissive of the idea and Democrats are divided,” said Greg Valliere, chief U.S. policy strategist at AGF Investments, in a note.