(Headline USA) President Joe Biden called on Congress this week to suspend the federal gas tax for three months to ease record-high gas prices and soaring inflation rates. But according to economic experts, his plan could make inflation even worse.
The federal government currently charges 18 cents in taxes per gallon of gasoline and 24 cents per gallon of diesel. Suspending this tax, however, is not a solution, according to the non-partisan Committee for a Responsible Federal Budget. The organization argued that suspending the tax could actually increase demand for gasoline and other goods and services, leading to reduced supply.
“While the gas tax holiday may reduce prices at the pump, it will further increase demand for gasoline and other goods and services at a time when the economy has little capacity to absorb it,” the group explained.
“The result could be even higher rates of inflation in 2023.”
During his remarks from the White House, Biden claimed the gas tax holiday would “provide families some immediate relief” without mentioning the potential long-term consequences.
“I fully understand the gas tax holiday alone is not going to fix the problem,” he said.
“But it will provide families some immediate relief, give them a little bit of breathing room, so we continue working to bring down prices for the long haul.”
Biden’s request will likely die in Congress, where both Democrats and Republicans have expressed skepticism of the plan.
“We have a situation where there’s money coming out of the Highway Trust Fund, it’s going to the oil companies, they may not give it to the consumer, and it has to be paid for. … That’s the con,” House Speaker Nancy Pelosi, D-Calif., said.
House Transportation and Infrastructure Committee Chairman Peter DeFazio, D-Ore., made similar points.
“As discussions on possibly suspending the federal gas tax continue, I urge my colleagues to see this for what it is: a short-sighted proposal that relies on the cooperation of oil companies to pass on miniscule savings to consumers,” DeFazio said in a statement.
“Suspending the federal gas tax will not provide meaningful relief at the pump for American families, but it will blow a multi-billion-dollar hole in the highway trust fund putting funding for future infrastructure projects at risk,” he added.