WASHINGTON -- President Joe Biden on Wednesday called on Congress to suspend federal gasoline and diesel fuel taxes for three months -- a move meant to ease financial pressure on motorists.
Biden also called on states to suspend their gas taxes or provide similar relief, and he delivered a public critique of the energy industry for prioritizing profits over production. It would take action by lawmakers in Washington and in statehouses across the country to suspend the fuel taxes.
"It doesn't reduce all the pain, but it will be a big help," Biden said. "I'm doing my part. I want Congress, states and industry to do their part as well."
At issue is the 18.4 cents-a-gallon federal tax on gas and the 24.4 cents-a-gallon federal tax on diesel fuel. If the gas savings were fully passed along to consumers, it would mean saving roughly 3.6% at the pump, when prices are averaging about $5 a gallon nationwide. On Wednesday, the average price of a gallon of gasoline in Arkansas was $4.50, down from $4.54 a week ago, according to AAA.
State levies on gas tend to be higher than the federal tax. In California, for example, consumers pay 56.6 cents per gallon of gasoline and 65.9 cents for diesel, according to the Federation of Tax Administrators. Arkansas levies 24.8 cents per gallon for gasoline and 28.8 cents per gallon for diesel.
Biden's push faces uphill odds in Congress, which must act in order to suspend the tax, and where many lawmakers, including some in his own party, have expressed reservations. Even many economists view the idea with skepticism.
Democratic House Speaker Nancy Pelosi offered a noncommittal response to Biden's proposal, saying she would look to see if there was support for it in Congress.
"We will see where the consensus lies on a path forward for the president's proposal in the House and the Senate," Pelosi said.
In his speech, Biden tied higher energy prices to Russia's invasion of Ukraine and said "defending freedom, defending democracy was not going to go without cost for the American people and the rest of the free world." The president noted lawmakers backed sanctions against Russia and aiding Ukraine despite the risks of inflation from resulting energy and food shortages.
Democrats, Republicans and independents in Congress chose to support Ukraine, "knowing full well the cost," he said.
"So for all those Republicans in Congress criticizing me today for high gas prices in America: Are you now saying you were wrong to support Ukraine?" Biden said. "Are you saying that we would rather have lower gas prices in America than [Russian President Vladimir] Putin's iron fist in Europe? I don't believe that."
The president said that "states are now in a strong position to be able to afford to take some of these actions," thanks to federal support from the 2021 covid-19 relief bill. But there is no guarantee that states will tap into their budgets to suspend their taxes on gas or to deliver rebates to consumers, as Biden is requesting.
Barack Obama, during the 2008 presidential campaign, called fuel tax relief a "gimmick" that allowed politicians to "say that they did something." He also warned oil companies could offset the tax relief by increasing their prices.
The administration is saying gas tax suspensions at the federal and state levels, as well as energy companies pouring their profits into production and refining capacity, could cut gas prices by $1 a gallon.
High gasoline prices pose a threat to Biden's electoral and policy ambitions. They've caused confidence in the economy to slump to lows that bode poorly for defending Democratic control of the House and the Senate in November.
Biden's efforts to cut gas prices included the release of oil from the U.S. strategic reserve and greater ethanol blending this summer.
The president can do remarkably little to affect prices that are set by global markets, profit-driven companies, consumer demand and aftershocks from Russia's invasion of Ukraine and the embargoes that followed. The underlying problem is a shortage of oil and refineries that produce gasoline.
Mark Zandi, chief economist at Moody's Analytics, estimated that the majority of the 8.6% inflation seen over the past 12 months in the U.S. comes from higher commodity prices related to Russia's invasion and continued disruptions from the coronavirus.
"In the immediate near term, it is critical to stem the increase in oil prices," Zandi said last week, suggesting that Saudi Arabia, the United Arab Emirates and a nuclear deal with Iran could help to increase supplies and lower prices. Republican lawmakers have tried to shift more blame to Biden, saying he created a hostile environment for domestic oil producers, causing their output to stay below pre-pandemic levels.
Howard Gleckman, a senior fellow at Urban-Brookings Tax Policy Center at the Urban Institute, wrote in a blog post that the suspension is "a terrible idea" and said the impact would be "modest," only saving the average driver less than $10 per month.
The tax suspension would give a "windfall" to the same oil companies Biden has accused of price gouging and eliminate a vital funding source for infrastructure projects, Gleckman wrote.
Senate Republican leader Mitch McConnell mocked the fuel tax cut idea as an "ineffective stunt" in a Wednesday floor speech. "This ineffective administration's big new idea is a silly proposal that senior members of their own party have already shot down well in advance," he said.
Rep. Peter DeFazio, the Democratic chairman of the House Transportation and Infrastructure Committee, said he would not support suspending the gas tax. "I'm going to be working against it. I have the largest committee in Congress, so we'll see."
DeFazio said a better course would be to tax oil companies on "windfall profits."
House Majority Leader Steny Hoyer, D-Md., said he would look at the proposal because Biden has proposed it.
"What I'm not sure is that it in fact will have the intended effect in terms of the retail price, whether in fact we will save the consumer money," Hoyer said. "Do I think we have the votes? We haven't counted, so we don't know yet."
Administration officials said the $10 billion cost of suspending federal fuel taxes would be paid for and the Highway Trust Fund kept whole, even though the gas taxes make up a substantial source of revenue for the fund. The officials did not specify any new revenue sources.
The president has also called on energy companies to accept lower profit margins to increase oil production and refining capacity for gasoline.
This has increased tensions with oil producers: Biden has judged the companies to be making "more money than God." That kicked off a chain of events in which the head of Chevron, Michael Wirth, sent a letter to the White House saying that the administration "has largely sought to criticize, and at times vilify, our industry."
Asked about the letter, Biden said of Wirth: "He's mildly sensitive. I didn't know they'd get their feelings hurt that quickly."
Energy companies are scheduled to meet today with Energy Secretary Jennifer Granholm to discuss ways to increase supply.
Congress has not increased the federal gas tax since 1993. But it has never lifted the tax either. Taxes on gasoline and diesel now supply a majority of federal funding used to build and maintain highways -- $36.5 billion in 2019 -- although outlays have exceeded dedicated revenues in recent years.
That means Biden's latest step to address one political vulnerability could undermine funding for one of the primary legislative accomplishments during his time in office: investments in infrastructure.
"I have not been for alleviating the gas tax because of the infrastructure implications there," Sen. Shelley Moore Capito, R-W.Va., said Wednesday.
But one of the more common questions she hears from constituents, she added, is: What about my gasoline?
"I think it's a temporary fix," Capito said. "But yes, people were saying, 'Do something.'"
Information for this article was contributed by Josh Boak, Lisa Mascaro, Matthew Daly and Kevin Freking of The Associated Press, Erin B. Logan of the Los Angeles Times (TNS) and Zolan Kanno-Youngs and Lydia DePillis of The New York Times.