Trump Floats Temporary US Gas Tax Halt as Pump Prices Soar

twxkozh8{oehd6o(iub90y27_media_dl_1.png American Automobile Association

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(Bloomberg) — President Donald Trump voiced support for a gasoline tax holiday to counter rising prices at the pump, as the cost of oil soars while the war with Iran drags on.

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Trump told reporters at the White House that he’ll seek to suspend the federal 18.4 cents a gallon tax on gasoline “until it’s appropriate,” though it’s unclear how much of the tax cut would reach consumers at the pump. 

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Trump acknowledged the savings to consumers would be a fraction of the run-up in prices related to the conflict.

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“It’s a small percentage but it’s still money,” Trump said.

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The average national price for regular gasoline has surged since the US and Israel attacked Iran in February, reaching $4.52 a gallon as of Sunday. The conflict has disrupted shipping through the Strait of Hormuz — through which about a fifth of the world’s oil and liquefied natural gas flowed before the war. 

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Trump first broached the idea in a phone interview with CBS earlier in the day. Following the report, GOP Senator Josh Hawley of Missouri said Monday he would introduce legislation to suspend the gas tax. 

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If supporters are successful, it’s unclear whether the temporary tax cut would significantly lower prices at the pump. A pause on the gas tax would likely lower prices between 10 and 16 cents a gallon, according to research from the Bipartisan Policy Center in April, citing estimates from the impacts of state-level gas tax suspensions in 2022.

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“The pass-through is rarely complete,” said Andrew Lautz, director of tax policy at the Bipartisan Policy Center.

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Compared to the $1.54-per-gallon increase in the average national cost of gasoline since the war started, a pause wouldn’t be a “massive improvement,” said Patrick De Haan, head of petroleum analysis at GasBuddy. The move would also likely keep consumers from cutting back as gasoline supplies dwindle, he said.

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“This is like putting lipstick on a pig,” De Haan said. “The real problem remains unresolved.”

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Trump is facing immense pressure to lower gasoline prices ahead of the midterm elections in November that will determine control of Congress. But like most presidents, he has few good tools at his disposal to tame surging prices.

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In addition to tapping the Strategic Petroleum Reserve again, Trump could place export controls on oil and refined products like gasoline, though experts have cautioned that such measures likely would be limited in the relief they provide and could have unintended consequences. The White House has repeatedly signaled that such a move is off the table.

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Meanwhile, gasoline stockpiles are almost near their 10-year lows seasonally, according to Department of Energy data. And in the Midwest, where pump prices have risen the fastest, supplies of gasoline are at their second-lowest seasonal levels ever.