What Would a Gas Tax Jubilee Do?

Yesterday President Biden floated the idea of suspending the federal gas tax as a tactic for providing consumers some relief at the pump. Unfortunately, that tax jubilee wouldn’t accomplish much as this piece at Politico by Tanya Snyder points out:

The hard realities: Even if Congress was in a mood to cooperate with Biden’s plan, most studies show that only a small portion of the savings from halting the tax would make its way to consumers. Meanwhile, the tax pause would take money away from Biden’s signature infrastructure law — and it probably wouldn’t offer his party much help with voters in November. It does, however, give Biden some cover to appear as if he’s at least trying to tackle an issue that’s hitting Americans in the pocketbook.

The reason for that is two-fold. First, the jubilee wouldn’t even roll prices back to where they were last month. Second, the gas taxes go into the federal highway fund and are used for maintaining the interstate highways.

As Ms. Snyder points out the degree to which such jubilees are passed on to consumers varies from state to state:

The University of Pennsylvania’s Wharton School examined the impacts in the states that have paused their gas taxes in the last few months and found that in Maryland, 72 percent of tax savings were passed onto consumers, compared with 58 percent to 65 percent in Georgia and 71 percent to 87 percent in Connecticut. Still, the Wharton researchers found that “these price reductions were often not sustained during the entire holiday.”

And the dollar amount Wharton put on the savings from a potential gas tax holiday at the federal level was meager. In March, they found that suspending the federal gas tax through December would save the average person between $16 and $47 on gas while lowering federal tax revenue by about $20 billion.

and it is possible that the tax jubilee could have perverse consequences:

Drivers would easily forget the small savings in the gas tax amid daily fluctuations in fuel prices, which can “drop or surge by 10 to 20 cents a gallon in a single [trading] session,” said Tom Kloza, global head of energy analysis at the Oil Price Information Service. It could even backfire: “The problem with an 18 cents a gallon gas tax holiday is that it juices up demand when the supply-and-demand balance is already tilted toward tight supply.”

Furthermore, if the reduction in federal gasoline tax revenue is offset by deficit spending, it would exacerbate part of the reason we’re experiencing the present general inflation.

All of which goes to demonstrate that policy is hard.

Just in case you’re curious the gas taxes we pay here in Chicago are

Jurisdiction Tax
Federal 18.4
Illinois 39.2
Cook County 6.0
Chicago 8.0
Total 71.6

All taxes are levied in cents per gallon.

The situation with the state tax is complicated and, as should be expected, highly political. The statutory state gas tax is scheduled to rise from 19 cents per gallon to 39 cents per gallon on July 1 but Gov. Pritzker has delayed the tax increase, forcing gas station owners to put stickers on the pumps claiming that Gov. Pritzker reduced taxes thereby turning every gas pump into a campaign advertisement. It’s an election year. The station owners are responding by putting an additional sticker on the pumps explaining what is happening in more detail.

11 comments… add one
  • Drew Link

    If you drive 17,500 miles per year as many do. At 25 mpg you buy 58 gallons a month. And at the 70% pass through and $.18 tax cited you save $1.82 per week.

    Enjoy your can of beer.

    Any day now I expect the Administration to begin touting inflation and its noble fight against obesity. Trot out Janet Yellen. She’ll sell it. Of course advisor Cecilia Rouse sees MORE spending as the cure for inflation. Maybe Biden should double the gas tax. Yellen Rouse cage match……

  • steve Link

    This is just performative. It worked for Trump since his fans believe anything he told them but this doesnt do much and the Dems dont have a cult so I dont think many people will believe this is much of an answer.


  • Greyshambler Link

    A distraction from the ruling party’s stated goal.
    Energy transition by government decree.
    Hope you all like your beer warm.

  • Jan Link

    ”The economy is primed to enter a recession as the second-quarter report is bound to show another period of economic contraction. The supply chain crisis is still ongoing. The pain at the gas pump lingers. Inflation is torching the wallets of working Americans. American mothers still can’t find baby formula. The southern border remains a mess. There is not a single crisis that’s being managed in any meaningful way. Biden’s crew has done nothing. They can’t even get a WNBA star out of Russia who’s supposedly being unlawfully detained. Brittney Griner has been there since February. They can’t even set up a call between Griner and her wife; no one was at the US Embassy’s front desk to connect the call. The incompetence is pervasive.”

    The excerpt is from Matt Vespa, taken from an article posted on Townhall. Even though Vespa was writing about the most recent gun control legislation being considered, the crux of it is applicable to everything Biden has done during his presidential term, including his wimpy gesture to buffer rising gas prices. Overall, Biden’s presidential hand has either obliterated good, workable policies that were in place before he took office, or orchestrated ideas and actions that proved to be big nothing burgers. This gas tax holiday falls into the nothing burger category, and is useless in countering the underlying problem that the Biden policies actually created.

    BTW, Steve, I’m still waiting for that list of “strong,” positive accomplishments, the last 18 months, that Biden can add to his presidential resume.

  • steve Link

    Just a few.

    GDP up 5.7% in 2021, better than any increase in the prior 4 years.

    Job growth of 6.4 million in 2021. (Prior POTUS had negative growth. Obama had 10 million over this last 4 years.)

    Getting us out of Afghanistan

    Handling of Ukraine. The deliberate leaking of intel showing that Russia was going to invade while they were denying it (as were the Russians who post here) was a great idea as it undercut their ability to claim some fake rescue operation. Has done a good job of walking the line of offering help but not getting us directly involved and risking a larger war.

    Normalcy- Nice to not have POTUS recommending medicines he doesnt know anything about, one who doesnt engage in juvenile name calling and doesnt have to personally denigrate half the country every time he speaks. Granted, its too late to make a difference.

    Overturning the sunset rules for HHS. That was stupid posturing and not effective management.

    Infrastructure bill. Not perfect but Trump was largely unable to work with anyone so he couldn’t get something like this done.


  • Jan Link

    In Trump’s last 3rd quarter the GDP rose to 33.1% – a byproduct, though, of the erratic COVID economy. Biden, OTOH, saw the economy shrink to a negative GDP, while inflation rose to 7%, at the beginning of 2022.


    The job participation rate was very high under Trump, as was household income because of higher wage growth – better than under either Bush and Obama.

    Afghanistan was already having a carefully planned exit strategy under Trump. When Biden took the WH, his transition team refused to meet with the former administration’s to see what this plan entailed. Instead, the exit was a knee-jerk one, costing military and civilian lives, and a bad taste internationally as to the leadership skills of this country. It is also thought such a mismanaged exit galvanized Putin into thinking he could take Ukraine without any problem because of Biden’s weak leadership.

    There has been nothing normal about Biden’s presidency. If it were not for the media shielding him from investigations into himself, his son and the confounding and damaging policy changes made in the last 18 months, his approval rating would be in the teens, rather than the latest one of 32%.

    Horrible infrastructure bill with only a small percentage of the funding actually going towards infrastructure.

  • Jan Link

    BTW, Biden’s glowing job numbers were not because of economic growth and adding new jobs. Instead, the numbers he boosts are simply jobs coming back – although some 4 million quit their jobs, in one month’s time, alone.

    Basically, there is no way to clean up all the damage Biden has done, in less than 2 years time, by selectively retrieving 2021 stats, that mostly spilled over from a recovering economy produced under Trump. IOW, Biden inherited an economy that was in the process of stabilizing, a controlled southern border mutually managed by agreements made on both sides of the border, a ME and a world having no ongoing wars, NK not pumping out threatening missiles, higher public optimism going in a better direction than most think we are headed today. Also, it’s much more reassuring to have a president issuing mean tweets, than one who incoherently babbles and grabs inappropriately at little children.

  • Drew Link

    Stop the sophistry, steve. Selective stats concerning rebound from lockdowns is not real growth. Who do you think you are fooling?

  • steve Link

    I understand the rules Drew. Cherry picked numbers count for your team but not for Dems.

    LAbor force participation rate? It hit a low under Trump at 60.2%. Under Biden it has steadily climbed. It was higher than Trump’s best number for 5 of the 8 years Obama was in office. Numbers at link. (Do you just make up stuff? This is easy to find.)


    Afghanistan? Trump had 4 years to leave. He said we should leave. He didnt because he is a coward.

    NK? Trump said it was fixed. Guess not. (Those paying attention knew that since they went back to work on nukes right away, but pretty sure you weren’t paying attention.)

    “If it were not for the media shielding him from investigations into himself, his son”

    Does it seriously never occur to you that the right has its own media, its own lawyers, etc? Trump himself said he hired the best people so you guys must have the best lawyers. This is just like Lois Lerner and all of the other bogus stuff.


  • Jan Link

    Spin on, Steve.

  • steve Link

    Says the woman who claimed Trump had better labor participation numbers than Obama without looking it up.


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