Trump Team Seeks Longer Gas Tax Holiday With Phased-In Return

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(Bloomberg) — The Trump administration is working with Congress to suspend federal excise taxes on gasoline and diesel as the war in Iran drives up oil and fuel costs.

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Talks are underway on drafting the fuel tax suspension in a way that provides relief without provoking a run on gasoline supplies, while also preventing other unintended consequences, a senior administration official said. 

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A major concern is that any abrupt end of the tax holiday could prompt a rush of buying by consumers looking to take advantage of the discount before it disappears, the official said. Administration officials are considering language that gradually restores the taxes on gasoline and diesel, potentially over more than a year, to avoid sparking supply shortages.

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President Donald Trump has called for suspending the tax “until it’s appropriate.” Lawmakers on Capitol Hill have advanced legislation that would lift both the 18.4-cent-per-gallon levy on gasoline as well as the 24.4-cent-per-gallon charge on diesel. 

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One plan offered by Senator Josh Hawley, a Missouri Republican, would limit the relief to 90 days — though it would give the president the option of extending the tax holiday. A separate proposal being advanced by New Jersey Republican Representative Jeff Van Drew would halt the fees for 18 months before gradually phasing them back in. 

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Meanwhile, Representative Brendan Boyle, a Pennsylvania Democrat, has proposed legislation that would phase out the federal gasoline tax whenever the national average price exceeds $4 a gallon, with the extent of the relief pegged to pump costs.

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Some critics have dismissed the potential savings as negligible, since fuel prices have soared amid the Middle East war, with Iran effectively closing a critical artery for the world’s energy shipments. 

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Unleaded gasoline averaged $4.53 per gallon on Monday, according to auto club AAA, a 52% increase since the start of the conflict. Diesel, meanwhile, has climbed 50%, to a nationwide average of $5.65 per gallon. 

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US Interior Secretary Doug Burgum, who also heads Trump’s National Energy Dominance Council, said the savings would help consumers. 

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“In aggregate, if you take a look at the millions of gallons of gasoline that are consumed every day by Americans, even 18 cents a gallon adds up pretty quickly, in terms of keeping money back in their pockets,” he said in an interview with Bloomberg. 

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Explainer: Would Pausing the US Federal Gas Tax Help Drivers?

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Experts have warned a gas tax holiday could work against the goal of maximizing fuel supply by incentivizing motorists to increase their purchases, while simultaneously depriving the government of money needed to build and repair highways. It’s also not clear all of the savings would be passed on to consumers.

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Some of those fears previously had helped dampen enthusiasm for the idea on Capitol Hill, with House Speaker Mike Johnson telling Bloomberg Government last week that it’s important to examine “any unintended consequences.” 

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Republicans also broadly resisted former President Joe Biden’s push to lift the tax in 2022, after Russia’s invasion of Ukraine drove a surge in oil and gasoline prices. 

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