White House, Dems eye pause of gas tax as prices soar, election looms

  • Comments
  • Print

The White House and top Democratic lawmakers are beginning to weigh a new push for a federal gas tax holiday, potentially pausing fees at the pump as part of a broader campaign to combat rising prices.

The early deliberations come days after a group of vulnerable Senate Democrats introduced a bill that would suspend the gas tax of roughly 18 cents per gallon for the rest of the year, a measure party lawmakers discussed at a lunch Tuesday. Asked about the proposal, the White House signaled that “all options are on the table” as the administration tries to ease the growing financial burdens Americans are facing during a period of high inflation.

For now, the White House has not offered any official, explicit endorsement of the policy. Behind the scenes, top aides have debated whether it would provide meaningful relief—or ultimately serve to benefit the producers of gas more than the consumers of it. Some senior officials also fear the policy might be difficult to end later, since no politician would want to be seen as raising prices, according to two people familiar with the matter who spoke on the condition of anonymity to describe the internal discussions.

Their efforts have grown more urgent as the cost of gasoline has spiked in recent months, with average prices topping $3.48 per gallon last week, according to data released Monday by AAA. That’s roughly $1 more than at the same time last year, reflecting the increase in demand as economic growth surges and the rising geopolitical tensions between Russia and Ukraine.

The uptick also arrives at a time when U.S. families are facing other recent financial shocks, including rising housing costs and higher prices at the grocery store. Prices overall climbed 7.5% in January, compared with the same month in 2021, as inflation continued at its most rapid clip in about four decades.

The White House already has made several attempts to address mounting public frustration with high gas prices. In November, President Joe Biden opted to release 50 million barrels of oil from the country’s Strategic Petroleum Reserve. And the administration more broadly has sought to determine whether the price increases are the result of corporate consolidation in the oil and gas sectors, an area that federal antitrust regulators are now exploring.

Some of the moves have frustrated climate advocates, who are looking to phase out fossil fuels in favor of cleaner, greener energy. In the meantime, gas prices have continued to climb anyway, creating economic troubles for Americans—and new political headaches for Democrats, especially entering a midterm election season that could hinge on the party’s ability to control inflation.

The looming risks prompted Sens. Mark Kelly, D-Ariz., and Maggie Hassan, D-N.H., two lawmakers facing tough reelection fights, to unveil a bill last week that would suspend the tax until January. Their backers include Sens. Debbie Stabenow, D-Mich., Catherine Cortez Masto, D-Nev., Raphael Warnock, D-Ga., and Jacky Rosen, D-Nev., who similarly face tough midterm contests entering November, when Democrats’ majorities in the House and Senate are at risk.

Kelly said in a statement announcing the bill that it would help families “struggling with high costs for everything from gas to groceries,” while Hassan said Democrats broadly needed to “think creatively about how we can find new ways to bring down costs.”

Along with the potential pause, Democrats aim to task the Treasury Department with ensuring that oil and gas giants pass the savings back to consumers. And party lawmakers have proposed shifting other federal money into the federal highway fund, which is normally financed through the per-gallon federal fees. The trust fund, which brought in more than $39.5 billion in 2019, suffers from an annual shortfall, partly because the gas tax has remained unchanged since 1993—all while some consumers have shifted to electric vehicles that are not subject to the same fees.

For now, Democratic Senate leaders privately have explored the idea, according to two people familiar with the matter who spoke on the condition of anonymity to describe the conversations. Kelly also planned to pitch his fellow lawmakers at a regularly scheduled caucus lunch Tuesday, a third person said.

But the proposal drew early opposition from at least one pivotal party lawmaker, Sen. Joe Manchin, D-W.Va., who told reporters Tuesday he was not comfortable with the fact that a gas tax holiday could leave federal highway funds in worse shape.

“People want their bridges and their roads, and we have an infrastructure bill we just passed this summer, and they want to take that all away,” said Manchin, adding, “It just doesn’t make sense.”

Some House Democrats also have expressed interest in the suspension of the gas tax, according to a senior aide who spoke on the condition of anonymity to discuss the early conversations. Other Democrats in Congress even think there could be an opening to include the measure in any longer-term deal to fund the government, known as an omnibus. But aides cautioned that the agreement remains under negotiation, and no decisions have been made about whether to push for its inclusion.

The Biden administration, meanwhile, sounded an open-minded note as talks continued on Capitol Hill, where any pause of the gas tax is likely to require Republican support in the narrowly divided Senate. The White House’s National Economic Council has led the internal review of the idea, two people said.

“Every tool is on the table to reduce prices,” White House spokeswoman Emilie Simons said in a statement. “The President already announced a historic release of 50 million barrels from the strategic petroleum reserve, and all options are on the table looking ahead.”

The federal effort coincides with similar pushes among Democratic and Republican governors and state legislators who have explored their own gas tax holidays this year targeting local levies at the pump. Celinda Lake, a Democratic pollster who worked for Biden, said the idea is “very popular” when tested at the state level among voters.

“It could be a great example of the White House being in touch on how rising prices feel to people,” Lake said. “It’s a great way of showing the president is using all the tools in his tool chest to take on inflation, and it’s a great populist issue because people are always mad at gas prices and gas taxes.”

But Lawrence Summers, a treasury secretary and top White House economist under previous Democratic administrations, called the idea of a gas tax holiday “shortsighted, ineffective, goofy and gimmicky.” A high-profile critic of the Biden administration on the issue of inflation, Summers said the policy’s potential impact is at best unclear, because it may boost demand in other parts of the economy.

“It’s terrible policy at a moment we’ve labeled climate change as an existential threat,” Summers added.

Please enable JavaScript to view this content.

Story Continues Below

Editor's note: You can comment on IBJ stories by signing in to your IBJ account. If you have not registered, please sign up for a free account now. Please note our updated comment policy that will govern how comments are moderated.

5 thoughts on “White House, Dems eye pause of gas tax as prices soar, election looms

  1. Let’s see: In typical fashion, Democrats create a problem (high gas prices due to cancelling the pipeline, among other things) and then propose to solve the problem by pausing taxes needed to pay the onerous national debt they are more than happy to increase. Yeah, that’ll work…

  2. Now that the Build Back Better bill has not passed (and based on MSM bias…it was supposed to improved our roads, highways, and bridges). We don’t need extra funds from the federal gas tax and can just suffer when roads and bridges need repair. Instead we will need to buy war bonds to support the troops sent to defend Ukraine and Taiwan because our current administration is perceived as weak and Russia/China are moving forward on expansionist policies.