Washington – President Joe Biden on Wednesday called on Congress to suspend federal taxes on gasoline and diesel for three months, an idea that seeks to ease financial pressures on the bomb, but also reveals the political toxicity of high gas prices in an election year.
It also calls on states to suspend their own gas taxes or provide similar relief, the White House said.
The White House said in a statement: “The price of gas has risen sharply worldwide and nearly $ 2 a gallon in America since (Russian President Vladimir) Putin began amassing troops on the Ukrainian border. “.
At issue are the federal tax of 18.4 cents per gallon on gas and the federal tax of 24.4 cents per gallon on diesel. If gas savings were fully passed on to consumers, people would save about 3.6% on the pump at prices of about $ 5 a gallon nationwide.
But many economists and lawmakers on both sides are skeptical of the idea of a gasoline party.
Barack Obama, during the 2008 presidential campaign, called the idea a “trick” that allowed politicians to “say they did something.” He also warned that oil companies could offset the tax cut by raising their prices.
High gas prices pose a fundamental threat to Mr Biden’s electoral and political ambitions. They have caused confidence in the economy to fall to unpredictable lows for the defense of democratic control of the House and Senate in November.
The president’s past efforts to reduce gas prices, including the release of oil from the U.S. Strategic Reserve and a larger blend of ethanol this summer, have done little to save the pump. moves on to the idea of a gas tax party.
Mr. Biden has acknowledged how gas prices have been a drain on public enthusiasm as he tries to convince people that the U.S. can still turn to a clean energy future. In an interview with The Associated Press last week, he described a country that already has some psychological scars from the coronavirus pandemic that is now worried about how to pay for gas, food and other commodities.
“If you look, until gas prices started to go up,” Biden said, “things were much more, they were much more optimistic.”
The president can do very little to set the prices set by global markets, profit-oriented companies, consumer demand, and the aftermath of Russia’s invasion of Ukraine and the embargoes that followed. The underlying problem is the shortage of oil and gas-producing refineries, a challenge that a tax exemption may not necessarily solve.
Mark Zandi, chief economist at Moody’s Analytics, estimated that most of the 8.6% inflation seen over the past 12 months in the US comes from rising commodity prices due to the Russian invasion. and continuous coronavirus outages.
“In the near future, it is crucial to curb rising oil prices,” Zandi said last week, suggesting that Saudi Arabia, the United Arab Emirates and a nuclear deal with Iran could help boost oil prices. supplies and reduce prices.
Republican lawmakers have tried to put more blame on the president, saying he created a hostile environment for domestic oil producers, keeping his production below pre-pandemic levels.
Republican Senate leader Mitch McConnell scoffed at the idea of a gasoline tax cut in a speech on the floor in February. “They’ve spent an entire year waging a holy war against affordable American energy, and now they want to use a lot of taxpayer money to hide the consequences,” he said.
And House Speaker Nancy Pelosi has previously voiced doubts about the value of the tax suspension. In late April, when asked about the possibility of a federal gas tax, she replied, “The advantages are that they are good public relations,” and then added, “The downside is that there is no guarantee that l “Savings, the reduction of the federal tax: this affects the consumer. We had no evidence to think that the oil companies would transfer it to the consumer.”
He also told reporters, “We have to pay for it.” Funds for this fiscal holiday would come from the Highway Trust Fund, he said, “and we can’t have that deficit there.”
“The question is,” he said at the time, “is it worth going to get money, go back to cover the deficit and the trust fund, in order to get a break from the big oil companies?”
Government officials say the $ 10 billion cost of the gas tax holiday would be paid and the Highway Trust Fund would be kept intact, although gas taxes are a substantial source of income for the fund. Officials did not specify a new source of revenue.
The president has also called on energy companies to accept lower profit margins to increase oil production and refining capacity.
This has increased tensions with oil producers: Mr Biden said companies were earning “more money than God”. This started a string of events in which Chevron chief Michael Wirth sent a letter to the White House saying the administration “has largely tried to criticize, and sometimes vilify, our industry.”
Asked about the letter, Mr Biden said of Wirth: “He’s slightly sensitive. I didn’t know his feelings would hurt so quickly.”
Energy companies are scheduled to meet with Energy Secretary Jennifer Granholm on Thursday to discuss ways to increase supply.
However, the White House said on Wednesday that “the United States has already produced more oil during the first year of this administration than the first two years of the previous administration, and is on track to set new records. next year. “
Rebecca Kaplan contributed to this report.