President Donald Trump said on Monday he wants to suspend a federal tax on gasoline as a way to ease prices for consumers, as his efforts to reopen the strait of Hormuz and end the war in Iran continue to hit obstacles.
The excise tax on gasoline should be suspended until it is "appropriate" to reinstate, Trump told reporters, as he reiterated his prediction that gasoline and oil prices would "drop like a rock" once the war with Iran ends. The US collects a tax of 18.4¢/USG on gasoline and 24.4¢/USG on diesel. Pausing the collection of the tax, which would require approval by the US Congress, could put downward pressure on surging fuel prices that are nearing a four-year high.
"It's a small percentage, but it's still money," Trump said.
US consumers paid an average of $4.45/USG for regular grade gasoline, inclusive of taxes, in the week ending 4 May, according to the US Energy Information Administration. Trump had campaigned heavily on lowering prices — he pledged to cut gasoline prices in half within a year — but his war against Iran has caused price spikes. Trump has yet to say if he supports suspending only the gasoline tax or also the tax on diesel.
Suspending fuel taxes has bipartisan support. US senator Josh Hawley (R-Missouri) said on Monday he would introduce a bill to suspend the gasoline tax. In March, US senators Mark Kelly (D-Arizona) and Richard Blumenthal (D-Connecticut) introduced a bill to suspend the tax through 1 October. Earlier this year, Senate majority whip John Barrasso (R-Wyoming) sponsored a bill to repeal a separate 16.4¢/bl tax on crude and refined products under the "Superfund" hazardous waste site cleanup program.
Despite the political appeal of pausing fuel taxes, doing so would blow a major hole in the budget for roads and highways. Suspending gasoline and diesel fuel taxes would cost $39bn/yr, nonprofit group Committee for a Responsible Federal Budget said in March. A one-year fuel tax holiday would cause the US Highway Trust Fund, which pays for highways and road repairs, to run out of funding in June 2027, or 14 months early, the group said.
Trump has been struggling to negotiate an end to the war with Iran in a way that would reopen the strait of Hormuz and meet other policy goals. On Monday, he reiterated complaints with Iran's latest offer to end the war as a "piece of garbage". Trump also said the US-Iran ceasefire that began a month ago was under strain.
"I would say the ceasefire is on massive life support," Trump said.
High gasoline prices have become a growing frustration to the administration. After the White House spent much of last year taking credit for declines in the national average price that drivers paid for gasoline, Trump's cabinet is arguing that the focus by the news media on national prices is misplaced.
"If any of you could write a story that isn't the national average price of gasoline, it's just, that's a fake thing," US interior secretary Doug Burgum said Monday during an event held by the news outlet Breitbart. "The price of gasoline varies by state, varies by policy, varies by taxes, and there's some really rich reporting in there about the choices people have made."
