Biden pushes for gas tax holiday, but analysts see big flaws in his plan and predict Congress won’t give its OK

While President Joe Biden called on Congress on Wednesday to suspend federal gasoline and diesel taxes for three months, analysts criticized his proposal and predicted it would not get enough support from U.S. lawmakers.

The suspension “would require congressional action, which is very unlikely,” said Tobin Marcus, a political strategist and politician at Evercore ISI, in a note Wednesday.

The launch of a “policy guidance proposal that will not be enacted reinforces our belief that the White House sees little impact that they are willing and able to do unilaterally on energy prices or inflation more broadly.” add Marcus, who worked as Biden. economic adviser when the veteran politician was vice president.

“We continue to receive questions from investors about how Democrats will respond to inflation before the midterms, and this announcement suggests that there are few new ideas.”

Related: As Biden fights inflation, economists warn that weapons for this battle seem “extremely limited”

Biden, for his part, said in a speech on Wednesday that “a gas tax party alone will not solve the problem, but will provide families with immediate relief.”

“It calls on companies to pass on every penny of this 18-cent reduction to consumers. Now there is no time to take advantage,” he said.

Federal gas tax RB00,
+ 0.64%
is 18.4 cents a gallon, while the federal rate on diesel is 24.4 cents a gallon.

A High Capital Markets analyst was unhappy about the prospect of a gas tax cut in the House and Senate, but said it could offer clues as to what lies ahead. Biden’s Democratic Party controls both chambers, but barely.

“The gas tax party is unlikely to happen, but it highlights the future risk,” said Benjamin Salisbury, research director at Height Capital Markets, in a note.

“Although the administration has so far resisted the need for more invasive interventions, such as an exemption from fuel formulation in the summer, an exemption from the Jones Act, the unexpected profit tax or a ban on export of crude oil and / or products, its willingness to push against senior Democratic leaders shows the urgency of the White House responding to prices, which increases the risk that these policies will come into play if political pressure and / or prices are deepening, “Salisbury added.

“We anticipate that the president will continue to try to reduce prices, including pressure on oil producers and refineries, with a low probability of risk and a high impact of executive action if the situation worsens.”

Leading Democratic lawmakers have been skeptical about a drop in gasoline taxes.

Democrat Peter DeFazio of Oregon, chairman of the House Transportation and Infrastructure Committee, said in a statement Tuesday that it is a “short-sighted proposal that relies on the cooperation of oil companies to pass on savings.” lowercase to consumers “.

“The suspension of the federal gas tax will not provide significant relief to the bomb for American families, but will blow up a multimillion-dollar hole in the road trust fund, jeopardizing funding for future road projects. ‘infrastructure,’ added DeFazio, who is not looking. re-election.

“We should directly relieve American families struggling to make ends meet by ending the price hike and spirit, not approving a well-intentioned but ill-conceived policy that undermines the long-term positive impacts of “That’s why I introduced the Stop Gas Price Gouging Discounts and Taxes Act, which would tax the obscene profits of the oil industry in 2022 and return revenue to Americans,” he said. ‘Oregon.

Related: As the weekend of July 4 approaches, Biden plans to pause the federal gas tax. Some states have already suspended gasoline taxes – here’s the driver’s savings

In late April, House Speaker Nancy Pelosi, a California Democrat, made a similar point, saying there was “no guarantee” that companies would pass on savings to consumers and that the resulting Highway deficit Trust Fund should be covered with other funding.

Pelosi did not commit on Wednesday and said in a statement: “We will see where the consensus lies on the way forward for the president’s proposal in the House and Senate.”

Biden said in his speech on Wednesday that lawmakers should be able to suspend the federal gas tax without affecting that toll road fund, because tax revenue has risen this year and the deficit has come down.

A White House statement said it was “asking Congress to ensure that a gasoline tax surplus does not have a negative effect on the Highway Trust Fund.”

In his remarks, Biden also reiterated his call for major US refineries to add more gas to the pumps, noting that his Energy Secretary, Jennifer Granholm, will meet with many of the refining companies on Thursday. .

Related: Biden rejects after Chevron CEO says oil industry has been vilified: “It’s slightly sensitive”

And see: Biden considers refinery profits “unacceptable”

In addition, the President stressed that oil prices CL00,
they have fallen and urged gas station operators to lower their prices.

“It simply came to our notice then. Global danger. Ukraine. These are not normal times. Reduce the price you are charging at the pump to reflect the cost you are paying for the product. Do it now. Do it today, “he said.

Read more: Why U.S. Motorists Suspect Rising Pump Prices and How Many Gas Stations Really Benefit From a Gallon of Gas

Too: What does a federal gasoline tax party mean for energy prices

A prominent Republican lawmaker criticized Biden’s proposal for a gasoline tax surplus.

“The big new idea of ​​this ineffective administration is a silly proposal that senior members of his own party have already rejected in advance,” Senate Minority Leader Mitch McConnell, a Republican from Kentucky, said in a speech. .

He also seems doubtful at a gas station party, the former Obama administration economic adviser Jason Furman warned that “most of the 18.4-cent reduction would be pocketed by the industry, with perhaps a few cents passed to consumers.”

“The government can’t decide who gets the benefits of a tax cut, it’s split between the two sides based on the responsiveness of supply and demand,” said Furman, a Harvard professor. in a tweet.

Greg Valliere, chief US policy strategist at AGF Investments, was not impressed either.

“There are many reasons why this is a bad idea, but the main flaw is that it has very little chance of winning the enactment. Republicans despise the idea and Democrats are divided,” Valliere said in a note.

Other flaws, according to Valliere, include the fact that Democrats have called it a ploy, and a break of 18 cents a gallon could be considered trivial.

This report was first published on June 22, 2022.

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