Key Takeaways
- President Donald Trump said he wants to pause the federal gas tax as prices soar during the Iran war.
- The tax – currently 18.4 cents per gallon of gas – contributes to federal road and public transport improvement.
- Lawmakers from both parties are on board, but it is uncertain whether enough would vote to approve the tax suspension.
President Donald Trump said on Monday that he will move to pause the federal tax on gasoline in an effort to alleviate rising fuel prices brought on by the Iran war.
Trump needs Congress’ approval to officially suspend the tax. As the president’s approval ratings continue to plummet – even among members of his own party – some see this move as an attempt to restore Trump’s reputation ahead of the midterm elections.
How Did Gas Get So Expensive?
The average national gas price was $4.52 per gallon as of Monday – 50% higher than the average price before the Iran war.
When the U.S. and Israel launched joint strikes against Iran on February 28, Iran responded by blocking oil tankers from leaving the Persian Gulf through the Strait of Hormuz, one of the world’s busiest oil shipping channels.
The U.S. retaliated by blocking Iranian ports, and the consequences of these blockades were felt around the world as energy prices soared.
Trump and Iranian leaders have struggled to come to an agreement despite a ceasefire, leading the war to drag on and the global impact to worsen.
What Is the Gas Tax?
Americans currently have to pay a federal tax of 18.4 cents per gallon when they buy gas, or 24.4 cents per gallon of diesel. States also set their own gas taxes – often higher than the federal tax.
The national average of state taxes is 32.6 cents for gas and 34.8 cents for diesel, though the taxes vary by state.
The tax money – more than $23 billion per year – goes toward the improvement of federal highway and public transit programs.
What Is Trump’s Proposal?
Trump said on Monday that he wants to suspend the federal gas tax “till it’s appropriate,” without giving an exact end date. Whether the pause actually happens is up to Congress.
The Trump administration has released 172 million barrels of oil from the Strategic Petroleum Reserve in an effort to stabilize oil prices. It also eased ethanol pollution rules in an effort to stretch domestic fuel supplies, lifted restrictions on foreign ships moving fuel between U.S. ports, and exempted sanctions on Russian oil until May 16.
But there is a cost if Congress approves Trump’s proposal. A hypothetical five-month pause on federal gas taxes would reduce the Highway Trust Fund’s revenue by $17 billion – about 46% of the annual total, according to the Bipartisan Policy Center.
Will the Tax Pause Actually Happen?
Republicans and Democrats have expressed support for a gas tax suspension.
Some Democratic lawmakers have been pushing for a gas tax pause since early in the Iran war. Democratic Sens. Richard Blumenthal of Connecticut and Mark Kelly of Arizona sponsored a bill that would suspend the federal tax through October 1, and Democratic Rep. Chris Pappas of New Hampshire sponsored a similar bill in the House.
Senate Majority Leader John Thune said he has not been keen on the idea of gas tax suspension, but he is willing to hear out his colleagues.
Several states have already suspended or reduced their state taxes on gas, including Indiana, Georgia, Kentucky and Utah.
But the only time Congress has ever approved a reduction in the federal gas tax was in 1934 – making it a half-cent lower at the end of Prohibition.
Former President Joe Biden tried to suspend the federal gas tax in 2022 when prices rose to $5 a gallon after Russia’s invasion of Ukraine, but there was skepticism from both parties and it did not gain congressional approval. Lawmakers expressed concern about depleting the Highway Trust Fund.
They will face the same question this time around: Is a substantial blow to the federal transportation budget worth a temporary ease on gas prices?