Gas prices are at $4.52 per gallon nationally and President Trump says he wants to suspend the federal gas tax to bring them down. It sounds like relief. The numbers tell a different story.
The federal gas tax is 18.4 cents per gallon. That is what would disappear if Congress approved the suspension. At current prices, that takes you from $4.52 to roughly $4.34 per gallon. On a 15-gallon fill-up, that is about $2.76 in savings. Per tank.
The reason gas is expensive right now has nothing to do with the federal tax. It has everything to do with the war with Iran. Since the conflict began in late February, gas prices have jumped more than 50 percent, from around $3 per gallon to where they are today, because Iran disrupted oil shipments through the Strait of Hormuz, one of the most critical oil routes in the world. The federal tax was always 18.4 cents. It did not go up. The oil supply went down.
Economists are saying what the math already suggests. Steve Cicala, an economics professor at Tufts University, put it plainly: suspending the tax does nothing about the supply problem at the heart of the price hike. In fact it could make things slightly worse, since cheaper gas tends to drive more demand, and more demand during a supply crunch pushes prices back up.
There is also the question of whether the savings even reach the pump. Gas stations and distributors are not legally required to pass the tax cut on to consumers. Some will. Some will not. The American Road and Transportation Builders Association noted that prices depend on global factors and individual retailers, meaning a federal tax cut does not guarantee a corresponding price drop at your local station.
Then there is the infrastructure piece. The federal gas tax has funded road construction and maintenance through the Highway Trust Fund since 1956. A five-month suspension would pull roughly $17 billion from that fund, about 46 percent of projected annual gas tax revenue. Those are roads, bridges and highways that still need to be maintained regardless of what is happening with Iran.
For the proposal to move forward, Congress has to approve it. Trump cannot do it by executive order. As of Monday, some Republican and Democratic lawmakers have expressed support, but the timeline is unclear and nothing has been voted on.
The bottom line is this: gas is expensive because of the war, not because of the tax. Removing the tax shaves about 18 cents off a gallon while the war-driven increase has added more than $1.50. It is a political move timed for the November midterms, and the savings, if they materialize at all, will be noticeable for about two minutes at the gas station.