Trump wants to lift the federal tax on gas. But don’t expect much relief even if it happens

Trump’s Proposal to Lift Federal Gas Tax Faces Mixed Reactions

Trump wants to lift the federal – President Donald Trump announced his plan to suspend the federal gas tax, aiming to alleviate the financial strain on drivers amid record-high fuel prices. The move comes as the U.S. continues its standoff with Iran, which has contributed to rising costs at the pump. While consumers are expressing growing unease over the economic outlook, experts caution that the suspension of the federal tax may not deliver the substantial relief many hope for. The current levy on gasoline stands at 18.4 cents per gallon, while the diesel tax is 24.4 cents per gallon. Although these rates appear modest, their impact is amplified by the ongoing price surge, which has pushed the national average to $4.52 per gallon as of Monday—up from $2.98 per gallon before the conflict began on February 28.

The Federal Gas Tax Suspension and Its Limitations

Trump’s proposal to pause the federal gas tax is not without precedent. Lawmakers have previously called for similar measures during periods of sharp fuel price increases, yet none have been enacted. The suspension would require congressional approval, a hurdle that has yet to be cleared. In 2022, when former President Joe Biden sought to temporarily halt the levy, a Democratic-led Congress rejected the request. Now, with renewed calls for action, several legislators have introduced bills to pause the tax, but the outcome remains uncertain.

Despite the potential for price reductions, experts argue that the impact on consumers would be limited. The Penn Wharton Budget Model noted that retailers and supply chain operators often do not fully pass on savings to end-users. According to their analysis, a federal tax holiday would result in a 13.2-cent-per-gallon drop for gasoline and a 14.6-cent-per-gallon decrease for diesel. A typical household filling a 15-gallon tank weekly would save approximately $35 over a four-month period. However,

“The actual benefit to consumers is going to be pretty small,”

said Kent Smetters, faculty director at Penn Wharton. This suggests that the relief may be more symbolic than practical.

Furthermore, the tax suspension could inadvertently exacerbate the situation. Steve Cicala, an economics professor at Tufts University, pointed out that the move does not address the core issue of supply constraints. In fact, it might encourage more demand, leading to further price hikes.

“This does nothing about the supply crunch,”

Cicala explained.

“It is instead encouraging drivers to drive during a supply crunch, which drives prices up further.”

The disconnect between supply and demand highlights the complexity of the problem, even with temporary tax relief.

The Highway Trust Fund and Financial Consequences

The federal gas and diesel taxes have long been a cornerstone of the Highway Trust Fund, which has supported transportation infrastructure since 1956. However, the fund is currently facing a crisis, having operated in deficit since fiscal year 2008. Additional federal revenue has been necessary to maintain funding for roads, bridges, and mass transit systems. A five-month suspension of the gas tax would reduce projected revenue by roughly $17 billion, or 46% of the total gas tax inflow for the fiscal year. This could force lawmakers to choose between financing the deficit with taxpayer funds or cutting spending on critical infrastructure.

Even if the tax is paused, the long-term implications for the Highway Trust Fund are significant. The fund is projected to deplete by fiscal year 2028, and a prolonged reduction in revenue could worsen this trend. Xan Fishman, vice president of the energy program at the Bipartisan Policy Center, warned that allowing roads and bridges to deteriorate would impose hidden costs on consumers. These include increased vehicle maintenance expenses and higher tolls, which could offset any immediate savings from the tax break.

Another critical factor is the outdated nature of the current tax rates. The gas levy, set in 1993, has not been adjusted for inflation, leaving it at 18.4 cents per gallon. If indexed for inflation, the rate would now be 40.8 cents per gallon, according to the Bipartisan Policy Center. This means the tax, while seemingly low, has effectively lost its value over time. The suspension would provide temporary relief but fail to address the long-standing issue of underfunded infrastructure.

State-Level Gas Tax Adjustments

While the federal government debates the tax suspension, several states have taken proactive steps to ease the burden on drivers. Georgia, for example, suspended its state gasoline tax of 33.3 cents per gallon and diesel tax of 37.3 cents per gallon for two months in March. Governor Brian Kemp, a Republican, will soon need to decide whether to extend this relief. Similarly, Indiana Governor Mike Braun, also a Republican, announced in April a one-month suspension of the state’s 7% fuel use tax. He recently extended the measure and paused the 36-cent-per-gallon gasoline excise tax until early June.

Kentucky and Utah have implemented similar reductions, providing temporary relief to their residents. These state-level actions reflect a growing recognition of the need to address rising fuel costs. However, they also highlight the challenges of implementing such measures at the federal level. While state suspensions may offer localized benefits, they are not a panacea for the broader economic and infrastructural challenges the country faces.

The combination of state and federal efforts underscores a fragmented approach to fuel pricing. Even as some states offer temporary breaks, the federal tax remains a key component of the transportation funding system. The lack of a unified strategy has left consumers navigating a complex landscape of taxes and subsidies, with little certainty about the long-term effects of the policy changes.

The Broader Implications for Consumers and the Economy

For many Americans, the federal gas tax suspension may feel like a small victory in the face of high costs. However, the benefits are likely to be modest. With gas prices already at their highest levels in years, any reduction is a welcome but temporary reprieve. The real impact of the tax holiday will depend on how quickly the savings translate to lower prices at the pump and how long the suspension lasts.

Meanwhile, the political stakes of the issue are high. Republicans, already concerned about their prospects in the upcoming midterm elections, are pushing for immediate action to address consumer dissatisfaction. But the suspension of the gas tax may not be enough to turn the tide. As experts like Smetters and Cicala note, the measure addresses symptoms rather than root causes, such as geopolitical tensions in the Strait of Hormuz and domestic supply chain inefficiencies. Trump’s comment that the ceasefire in the region was “on massive life support” further emphasizes the precarious nature of the supply situation.

Ultimately, the federal gas tax suspension could serve as a short-term solution, but its long-term effectiveness remains questionable. Without addressing the underlying factors driving fuel prices, consumers may continue to face financial strain. The debate over the tax highlights a broader tension between immediate relief and sustainable policy, with the outcomes potentially shaping the future of transportation funding and economic stability in the U.S. for years to come.