The White House is showing signs that it is more seriously considering a state gas tax exemption, sources tell The Hill.
President Biden’s economics team recently discussed the gas tax exemption and is expected to meet for further discussions later this week.
The White House is under political pressure to do something to help Americans struggling with high inflation and soaring gas prices. The economic storm has provided a serious headwind for Democrats ahead of the midterms, where the party fears a rant.
“It’s definitely an option on the table,” said a Democrat close to the White House.
Suspension of the federal gas tax would require an act by Congress, but a public push by Biden in favor of policy could help spur action on Capitol Hill.
Some bring the idea to the White House.
Robert Wolf, the former CEO of UBS Americas who served as economic advisor to President Obama, said he supports the Biden administration in introducing a state gas tax exemption, but only during the time of Russia’s war in Ukraine, which is sending prices skyrocketing drove.
He said most of the recent gas price hikes are linked to the Russian war.
“I know some might see this as a bit gimmicky because it will eventually reverse, but much of the recent gas increase since the beginning of the year is due to the Russian invasion,” Wolf told The Hill on Monday. “I think just tying it to the war and setting an end date makes it more strategic and intelligent.
“I also think it ties directly to Putin’s price hike narrative and fits well with President Biden’s concerns about how inflation is affecting hard-working Americans, and he will use every tool available,” he added.
A handful of states have already attempted to suspend their gas taxes, and Wolf said he will support Biden and urge remaining states that haven’t already done so to follow suit.
The White House has repeatedly said nothing is off the table when it comes to fighting rising gas prices.
“It’s clear that the White House is doing absolutely everything it can right now,” said Josh Freed, head of the climate and energy program at the centrist Democratic think tank Third Way. “It would make sense that a gas tax holiday would be on the table as part of their strategy.”
But Freed and others in Washington say a federal gasoline tax exemption would have little impact on consumers.
An estimate by the Penn Wharton Budget Model, released earlier this year, found that suspending the federal gas tax from March through December of this year would reduce average gasoline spend by $16 to $47 for that period.
Mark Zandi, chief economist at Moody’s Analytics, said studies have shown that about two-thirds of the tax cut would go to energy companies. He also argued that the tax breaks weren’t being targeted enough to reach low- and middle-income Americans, noting that wealthy individuals would benefit equally from the holiday.
The money raised by the federal gas tax also helps fund infrastructure projects across the country, meaning that suspending the tax could hamper those projects down the road.
“They also risk undermining funding for infrastructure, which is critical to the long-term growth of the economy,” Zandi said.
Still, the idea caught on with some Democrats on Capitol Hill earlier this year. Sens. Maggie Hassan (DN.H.) and Mark Kelly (D-Ariz.), both facing difficult reelection bids, introduced legislation back in February that would temporarily suspend the state gas tax until next January.
“Among other things, I campaigned for the gas tax to be suspended. That helps put some more money back in people’s pockets,” Hassan told Fox News on Friday. “I call on the administration to support this. They don’t have that yet, and that’s frustrating.”
The administration has limited and dwindling ability to counter rising gas prices and inflation.
Biden has taken a number of targeted actions, including ordering an unprecedented release from the Strategic Petroleum Reserve earlier this year and pressuring oil companies to ramp up production.
After a speech Friday at the Port of Los Angeles, Biden took aim at oil companies, accusing them of deliberately not ramping up production to demand more.
“Exxon made more money than God this year,” Biden said.
Biden is also considering a trip to Saudi Arabia in the coming weeks, which many experts believe will focus in part on urging the country to increase oil production so there is more supply in the global market.
According to a survey by the Washington Post and George Mason University’s Schar School of Policy and Government, most Americans expect inflation to continue to rise in the coming months. The poll showed nearly three-quarters of Americans are cutting back on spending, including on restaurants and entertainment, to prepare for the worst.
“The President is continuing and stepping up his dictation of the public of the challenge now and really pushing the producers to produce more oil and get it into the economy and bring more refineries back on line to refine this, that’s that what needs to be done,” Freed said.