Responses to Trump’s proposal for a gas tax holiday have been largely divided. House Republicans are considering introducing a bill within the next week to pause the federal gas tax of eighteen cents per gallon, though Trump’s endorsement seems minimal.
In a conversation with CBS News’s Nancy Cordes shared on X, Trump expressed his thoughts:
During a phone interview, Trump mentioned he wants to temporarily halt the 18-cent federal gas tax. “I think it’s a great idea,” he stated. “We’re going to remove the gas tax for a period, and as gas prices decrease, we’ll gradually reinstate it.”
The proposal has garnered interest from some Republicans, who are struggling in the midterm elections and need to demonstrate cost-cutting measures to voters.
Nevertheless, eliminating the federal gas tax might not actually reduce consumer expenses and could potentially increase prices.
An analysis from the Penn Wharton Budget Model study on suspending the federal gas tax for 122 days, as Trump suggested, revealed:
Consumers might not see the full benefit of the tax reduction. Short-term gasoline demand is fairly inelastic—drivers require fuel despite minor price fluctuations—allowing suppliers to potentially retain some of the tax cut as higher margins instead of passing on the complete savings at the pump.
According to PWBM’s synthetic control estimates (outlined in our state gas tax holiday analysis), the anticipated pass-through rates are 0.72 for gasoline and 0.60 for diesel.
Some of the tax relief will benefit Big Oil, leaving questions about the remainder.
