Trump May End Federal Gas Tax - Why This Still Won't Help at the Pump
In response to spiking gas prices and the ongoing crisis in the Middle East, President Donald Trump announced that he plans to temporarily halt the federal gas tax to ease the financial pressure on Americans this summer.
The national average gas price per gallon is $4.53 for regular gasoline and $5.39 for premium, thanks almost entirely to the ongoing Iran War. Those prices are staggeringly high not just in general, but especially compared to this time last year, when regular gas was $3.15 per gallon and premium was $4.00 on average, per AAA.
Explore More: 20 ZIP Codes First-Time Homebuyers Can Afford
Read Next: Start Growing Your Net Worth With Smarter Tracking
What is the Federal Gas Tax?
The U.S. federal gas tax is an 18.4 cent levy on every gallon of gasoline (diesel fuel is taxed at 24.4 cents per gallon). The money accrued from this tax is collected and used by the federal government to pay for transportation and highway infrastructure via the Highway Trust Fund.
The current federal gas tax rate has been the same since 1993, though individual states can add their own gas tax to the federal tax — meaning the overall gas tax paid at the pump can change from state to state.
Can Trump Actually Suspend the Federal Gas Tax?
While Trump has announced that he wants to pause the federal gas tax, such a move is easier said than done as it would require congressional approval. Congress has never approved a president’s request for a federal gas tax suspension before. As CNN reported, the most recent attempt was in 2022, when former President Joe Biden could not convince a Democrat-led Congress to pause the tax.
A major reason Congress has historically been hesitant about such a pause is the fact that suspending the federal gas tax hurts America’s highways. The tax is a major source of federal transportation funding via the Highway Trust Fund – so much so that CNN noted a simple five-month pause in the tax would reduce transportation and highway infrastructure funds by a whopping $17 billion. The loss of those funds would put Congress in a difficult spot: either raise taxes in general or reduce transportation funds and allow American roads and highways to deteriorate.
Would Pausing the Federal Gas Tax Help You at the Pump?
The bottom-line issue is whether or not a federal gas tax cessation would save you money at the gas pump. In short, the answer is no, not really.
Experts told CNN that a pause on the federal gas tax would likely increase taxes in general to make up for lost gas tax revenues. Additionally, retailers in the fuel supply chain would be under no obligation to pass the savings of a paused federal gas tax on to gas consumers.
Finally — and most importantly — if the federal gas tax is halted, gas prices would only drop by about 13.2 cents per gallon. As CNN noted, this would only save the average household approximately $25 per week.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
More From MoneyLion: