Trump wants to lift the federal tax on gas. But don’t expect much relief even if it happens
Trump Aims to Lift Federal Gas Tax, But Relief May Be Limited
Trump wants to lift the federal – President Donald Trump has proposed suspending the federal gas tax as a measure to ease the financial strain on drivers amid rising fuel costs. While this initiative might offer short-term relief, its long-term impact on consumer savings and infrastructure funding is expected to be modest, according to experts.
Gas prices have recently hit a national average of $4.52 per gallon, up from $2.98 per gallon before the conflict with Iran intensified on February 28. This surge has fueled public concern over economic stability, with Republicans facing scrutiny over their handling of inflation. However, the tax suspension alone may not significantly offset these rising costs.
Consumer Savings and Market Dynamics
Analysts estimate that removing the federal gas tax could reduce the average cost of gasoline by about 13.2 cents per gallon and diesel by 14.6 cents per gallon. For a typical household, this might translate to around $35 in weekly savings. Yet, as noted by Kent Smetters of the Penn Wharton Budget Model, the actual benefit to consumers is likely to remain limited.
“The real benefit to consumers is going to be pretty small,” Smetters remarked.
Steve Cicala, an economics professor at Tufts University, argues that the tax cut fails to address the underlying supply issues driving price increases. “This does nothing about the supply crunch,” he stated. “It’s instead encouraging drivers to drive during a supply crunch, which drives prices up further.”
Infrastructure Funding Challenges
The federal gas and diesel taxes have historically been vital to funding the Highway Trust Fund, which supports road and bridge maintenance since 1956. A five-month tax suspension could reduce the fund’s revenue by roughly $17 billion, or 46% of its annual projection. This would worsen the fund’s deficit, which has grown since 2008, potentially forcing lawmakers to either increase spending or cut projects.
With the fund projected to face depletion by 2028, any reduction in revenue could accelerate infrastructure neglect. Xan Fishman of the Bipartisan Policy Center warned that deteriorating roads would increase vehicle maintenance costs, indirectly burdening drivers.
Legislative and Political Barriers
Despite Trump’s push, congressional approval remains a hurdle. Lawmakers have not yet acted on the tax suspension, even as fuel prices soared in 2022. Former President Joe Biden’s request to cut the tax was rejected by a Democratic-led Congress, and similar measures have struggled to gain traction in recent months.
Trump’s plan to suspend the tax comes at a time of economic uncertainty. While lowering the levy might appeal to voters, it risks complicating broader fiscal strategies. The administration’s focus on immediate relief could clash with long-term budgetary goals, especially if supply constraints persist.
State-Level Actions and Regional Impact
Several states have independently addressed fuel costs. Georgia, for example, suspended its 33.3-cent-per-gallon gas tax and 37.3-cent-per-gallon diesel tax for two months, a move that could be extended by Governor Brian Kemp. Indiana’s Governor Mike Braun also paused the state’s 7% use tax on fuel and 36-cent-per-gallon excise tax through June.
These state-level efforts provide localized relief but do not solve the national supply crisis. While they may help in the short term, they highlight the limited scope of such measures in a broader economic context.
Long-Term Economic Concerns
One critical issue is the lack of inflation adjustments for the federal gas tax since 1993. With prices now over $4.50 per gallon, the static rate of 18.4 cents per gallon for gasoline and 24.4 cents for diesel has not kept pace with inflation. This discrepancy raises concerns about the tax’s fairness and its role in funding transportation infrastructure.