AGC questions Biden’s call for 3-month suspension of gas and diesel taxes

Listen to this article

Josh Boak
Associated Press

WASHINGTON (AP) — A national trades group is questioning President Joe Biden’s plan to suspend federal gas and diesel taxes, saying it will deprive the government of money needed for infrastructure projects while doing little to compensate for inflation.

“Instead of helping motorists, this ill-conceived proposal will make the cost of shipping and commuting higher as growing congestion and worsening road conditions delay shipments, leave commuters stuck in traffic, damage vehicles and undermine economic growth. Ultimately, all taxpayers will be forced, via new taxes or additional deficit spending, to plug the massive revenue holes this desperate ploy will create,” said Stephen Sandherr, executive director of the Associated General Contractors of America, in a statement.

His comments came in response to the president’s announcement on Wednesday that he plans to call on Congress to suspend federal gasoline and diesel taxes for three months — an election year move meant to ease financial pressures that was greeted with doubts by many lawmakers.

At issue is the 18.4 cents-a-gallon federal tax on gas and the 24.4 cents-a-gallon federal tax on diesel fuel. If the gas savings were fully passed along to consumers, people would save roughly 3.6% at the pump when prices are averaging about $5 a gallon nationwide.

It’s unclear, though, if Biden could push such a proposal through Congress, where many lawmakers, including some in his own party, have expressed reservations. And even many economists view the idea of a gas tax holiday with skepticism.

Barack Obama, during the 2008 presidential campaign, called the idea a “gimmick” that allowed politicians to “say that they did something.” He also warned that oil companies could offset the tax relief by increasing their prices.

Biden energy adviser Amos Hochstein pushed back on Wednesday, saying consumers could save about 50 cents a gallon if Congress and the states heed the president’s call and the oil industry doesn’t pocket the savings.

“That’s not a gimmick,” Hochstein, senior adviser for global energy security at the State Department, said on CNN. “That’s a little bit of breathing room for the American people as we get into the summer driving season.”

It was not immediately clear if the White House has the votes in Congress to suspend the federal tax.

High gas prices pose a fundamental threat to Biden’s electoral and policy ambitions. They’ve caused confidence in the economy to slump to lows that bode poorly for defending Democratic control of the House and the Senate in November.

Biden’s past efforts to cut gas prices — including the release of oil from the U.S. strategic reserve and greater ethanol blending this summer — have done little to produce savings at the pump, a risk that carries over to the idea of a gas tax holiday.

Biden has acknowledged how gas prices have been a drain on public enthusiasm when he is trying to convince people that the U.S. can still pivot to a clean-energy future. In an interview with The Associated Press last week, Biden described a country already nursing some psychological scars from the coronavirus pandemic that is now worried about how to afford gas, food and other essentials.

“If you notice, until gas prices started going up,” Biden said, “things were much more, they were much more optimistic.”

The president can do remarkably little to fix prices that are set by global markets, profit-driven companies, consumer demand and aftershocks from Russia’s invasion of Ukraine and the embargoes that followed. The underlying problem is a shortage of oil and refineries that produce gas, a challenge a tax holiday cannot necessarily fix.

Mark Zandi, chief economist at Moody’s Analytics, estimated that the majority of the 8.6% inflation seen over the past 12 months in the U.S. comes from higher commodity prices due to Russia’s invasion and continued disruptions from the coronavirus.

“In the immediate near term, it is critical to stem the increase in oil prices,” Zandi said last week, suggesting that Saudi Arabia, the United Arab Emirates and a nuclear deal with Iran could help to boost supplies and lower prices. Republican lawmakers have tried to shift more blame to Biden, saying he created a hostile environment for domestic oil producers, causing their output to stay below pre-pandemic levels.

Senate Republican leader Mitch McConnell mocked the gas tax holiday as an “ineffective stunt” in a Wednesday floor speech. “This ineffective administration’s big new idea is a silly proposal that senior members of their own party have already shot down well in advance,” he said.

House Speaker Nancy Pelosi and other congressional Democrats have long worried that suspending the gas tax would simply allow oil companies to reap additional profits with no guarantee the savings would be passed along to consumers at the pump.

– Dan Shaw of The Daily Reporter contributed to this article