A move by the Trump administration to suspend the federal gasoline tax would offer only modest relief to U.S. drivers socked by soaring fuel costs, according to tax and energy experts.
Americans face the highest prices at the pump since 2022, with a gallon of gas surging roughly $1.54 since the U.S. and Israel attacked Iran in late February. On Monday, drivers nationwide paid an average of $4.52 a gallon, according to AAA.
“I think it’s a great idea,” President Trump told CBS News White House correspondent Nancy Cordes on Monday of the plan to temporarily lift the gas tax. “Yup, we’re going to take off the gas tax for a period of time, and when gas goes down, we’ll let it phase back in,”
How much is the federal gas tax per gallon?
Suspending the gas tax would likely provide only limited relief, as recent price increases have far outpaced the federal levy. The federal government charges 18.4 cents per gallon on gas and 24.4 cents per gallon on diesel, with the revenue funding the Highway Trust Fund.
“I really don’t think it would make much of a difference when gas prices are $1.50 a gallon more than last year,” GasBuddy petroleum analyst Patrick De Haan told CBS News. “That 18 cents doesn’t really amount to a whole lot, in my mind.”
A tax suspension would reduce the current price of regular gas to $4.34 per gallon and diesel to $5.39 per gallon. That would return prices to roughly early May levels, when gasoline costs were still about 46% higher than before the Iran war.
“The irony of a gas tax suspension is that the higher prices go, the less of an impact it has,” Andrew Lautz, director of tax policy at the nonpartisan Bipartisan Policy Center, said Monday in a social media post. “For a sedan at national average prices, filling up your car costs $18-$25 more than it did before the war. A federal gas tax holiday saves you up $2 per fillup.”
Consumers can estimate their fuel savings using a tax calculator Lautz created. For example, a California driver with an SUV could save between $2.36 and $3.09 per fill-up if the federal tax were suspended. But that driver would still be paying roughly $24 to $32 more per tank since the Iran war began.
Obstacle ahead?
Because the fuel tax is governed by federal law, Congress would need to approve any suspension — a high hurdle given Washington’s partisan divide and the approaching Midterm elections. On Monday, Sen. Josh Hawley of Missouri, a Republican, said he planned to introduce legislation to suspend the federal gas tax.
The proposal could also face pushback because it would drain the Highway Trust Fund. The suspension would cost the federal government about $2.1 billion a month in lost revenue, GasBuddy’s De Haan estimated.
Already, some states have taken steps to waive their local fuel taxes, including Georgia, Indiana and Utah. Because state fuel taxes range from 15 cents to about 60 cents per gallon, state suspensions can provide more meaningful relief than waiving the federal gas tax, according to experts.
“Indiana is seeing huge gas price drops thanks to the state waiving the use tax and excise tax — motorists getting a nearly 60c/gal discount with prices falling below $4 at some stations,” GasBuddy’s De Haan wrote in a May 10 social media post.
Still, some state lawmakers are hesitant to waive their gas taxes due to concerns about depleting the funds needed to maintain roads.
Suspending gas taxes could have unintended consequences, De Haan added. The jump in energy prices signals an imbalance in the market, with the virtual shutdown of the Strait of Hormuz strangling global oil supplies, he said.
“Reducing or limiting taxes may actually do more to further the imbalance between supply and demand,” De Haan noted. “My worry is that politicians who may be looking to help their constituents fight against rising fuel prices are also disincentivizing changes that Americans would probably start to employ given the higher prices of fuel.”
He added, “And at least for now, politicians are interrupting that balance, and they risk putting through tax cuts — they may stimulate demand instead of disincentivizing it.”
