Gas tax pause no real holiday for cash-strapped drivers
A suspension of the federal gas tax would deliver a degree of relief at the pump, but don't expect a windfall of savings.
Why it matters: Drivers have been reeling from $5-a-gallon gas — more in some states — at a time when other prices have also been soaring.
- President Biden is weighing a suspension of the 18.4-cent-per-gallon tax, which has been steady for 29 years, and contributes to the Highway Trust Fund.
The big picture: The average driver of a large SUV — one of the most popular vehicle types in the country — would save about $4.60 a week, according to calculations by GasBuddy.
- That's about $239 a year, though it's hard to envision the gas tax suspension lasting that long.
- Altogether, it would equal savings of about $70 million per day for American drivers, GasBuddy analyst Patrick De Haan tells Axios.
The impact: Based on $5 gas, a gas tax holiday would equal savings of less than 4% per gallon.
Yes, but: Cheaper gas could have a countervailing effect by increasing demand and then driving retail prices back up, De Haan warns.
- The nation's gasoline refinery capacity is already straining to keep up with demand. U.S. domestic gasoline stocks fell by 700,000 barrels to 217.5 million last week.
- A tax suspension "could exacerbate the imbalance between supply and demand that has led us to record high prices," De Haan says.
Keep in mind: Suspending the gas tax would also deprive the nation's infrastructure of critical dollars for improvements.
The bottom line: A federal gas tax holiday might gather bipartisan support in Washington, but it won't make a big dent at the pump.