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Democrats mull a federal gas tax holiday to cut prices at the pump while Biden’s economic agenda is on ice

President Joe Biden, center, along with Senate Majority Leader Chuck Schumer, left, and House Speaker Nancy Pelosi at the Capitol on January 6, 2022 in Washington, DC.

Photo by Stefani Reynolds-Pool/Getty Images

  • Democrats and the Biden administration opened the door to a gas tax holiday to provide inflation relief.
  • But its encountering early resistance from Republicans and even some Democrats.
  • Some economists are also skeptical the idea will be effective at curbing prices at the pump.

Democrats are starting to float an idea to try and combat rising prices eating into Americans’ savings: a federal gas tax holiday.

The Washington Post first reported on Tuesday that Senate Democrats and the White House were eyeing a measure to briefly shelve the gas tax through 2022.

“Every tool is on the table to reduce prices,” White House spokesperson Emilie Simons said in a statement. “The President already announced an historic release of 50 million barrels from the strategic petroleum reserve, and all options are on the table looking ahead.”

One senior House Democratic aide also told Insider there was interest among House members as well.

The flurry of activity around the federal gas tax comes after a group of Senate Democrats unveiled legislation last week to suspend the gas tax. The measure from Sens. Mark Kelly of Arizona and Maggie Hassan of New Hampshire would shelve the 18.4 cents per gallon tax until Jan. 1, 2023. The pair face competitive re-election campaigns in the fall with the party trying to defend narrow Senate and House majorities.

Kelly told Insider that he was pitching it to Senate Democrats at their weekly caucus lunch as “something that directly helps people right now when they need it.”

Democrats once had a $2 trillion legislative package aimed at expanding childcare, education, and combating the climate emergency. But the House bill is dead on arrival in the Senate due to opposition from Sen. Joe Manchin of West Virginia. There’s been few sign of coordinated discussions in recent weeks to revive a skinnier version of the package.

The concept of a federal gas tax holiday ran into early opposition and skepticism from Senate Republicans, which may complicate its path to passage. The bill would likely need Republican votes so it clears the 60-vote threshold  and avoid a filibuster in the upper chamber.

Sen. Mitt Romney of Utah told Insider that he was opposed because it could jeopardize highway funding, which is partially funded by the federal gas tax.

Other Republicans also struck a skeptical tone. “It may give you momentary relief. It’s not anything that works to address the bigger problem,” Sen. Lisa Murkowski of Alaska told reporters.

It also encountered resistance among some Senate Democrats. Manchin told reporters, “I don’t think that makes any sense right now.” 

Inflation has hit a four-decade high in recent months, the product of supply-chain bottlenecks and ongoing labor shortages helping push up the cost of groceries, housing, and most other goods and services. A recent federal report showed prices rose 7.5% year-over-year in January

Some economists are skeptical that a gas tax holiday will be effective at curbing rising prices at the pump. Jason Furman, a former top Obama administration, wrote on Twitter that the step could lead to higher profits for oil and gas companies.

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