U.S. President Joe Biden has said that he's considering a federal gas tax holiday and gas rebate cards. How would these work? Could they really help the average U.S. consumer?
Average gas prices in the U.S. are hovering near $5 per gallon, and inflation rose to 8.6 percent in May. Some states have suspended gas taxes, and pressure is building on the Biden administration to announce a federal gas tax holiday. Fears of a recession are growing and midterm elections are approaching, creating even more pressure for Biden to win over voters.
What's a federal gas tax holiday?
In a bid to lower gas prices, the federal government could declare a gas tax holiday. This would mean suspending excise duty on gas sales for a specified period.
Biden calls on Congress to suspend federal gas tax until September 2022.
While Biden believes the three-month suspension will help Americans better handle the increases they are incurring at the pump, he reportedly won’t be “stripping money from the Highway Trust Fund that finances highways and mass transit.”
There has been criticism of a federal gas tax holiday.
Meanwhile, former Treasury Secretary Larry Summers has criticized the proposed federal gas tax holiday, calling it a “gimmick.” He foresees a recession. If that were to happen, crude oil prices should fall globally, bringing down U.S. gas prices.
Additionally, a federal gas tax holiday might lower funding for projects under Biden’s ambitious infrastructure bill, and it might not even make a major change for consumers. The federal gas tax is only 18.4 cents per gallon. The Biden administration would also need to work with other major oil producers to increase global crude oil production so that Russian supplies can be replaced.
A gas tax holiday and rebate cards would need Congressional approval.
Congress would need to approve a federal gas tax holiday, and Republicans haven’t warmed up to the idea. As for gas cards, which Biden has described as “part of the whole operation," we still don’t have much information. We don't know if the cards will provide rebates after gas purchases or if they'll be preloaded for consumers.
Gas prices have risen worldwide and governments are taking steps to ease the burden on consumers. While the U.K. has announced a windfall tax on energy companies’ profits, India has lowered the tax on gas and diesel.