President Joe Biden’s proposal to try to curb the runup in gas and diesel prices by suspending federal motor fuels taxes for 90 days—and use “other revenues" to offset the hit to the Highway Trust Fund—has sparked criticism from construction and engineering groups.
A key concern for construction and engineering groups is the proposal's impact on the Highway Trust Fund, which draws on income from the gas and diesel taxes.
The plan, which Biden announced on June 22, would require approval by Congress, where the proposal received mixed reviews.
The center of the proposal is what a White House fact sheet terms a gas and diesel tax "holiday,” extending for 90 days. The president said in a White House address that the temporary halt in both the federal gas and diesel taxes would provide “a little bit of breathing room” for U.S. motorists.
That revenue, in turn, is the prime source of federal highway funding and a key financial stream for transit projects, too.
Trust Fund Hit, and Offset
The White House estimated that the 90-day suspension of the gasoline and diesel taxes would reduce Highway Trust Fund revenue by $10 billion.
Biden said the tax pause would be carried out “without affecting the Highway Trust Fund.”
He added, “With tax revenues up this year and our deficit down over $1.6 trillion this year alone, we’ll still be able to fix our highways and bring down the prices of gas. We can do both at the same time.”
Biden didn’t specify the source of the offset to the trust fund’s lost income and the White House backgrounder referred only to “other revenues.”
The federal gasoline tax is 18.4¢ per gal., of which 15.44¢ goes to the Trust Fund’s highway account and 2.86¢ goes to the Trust Fund’s transit account
The federal diesel tax is 24.4¢ per gal., of which 21.44¢ goes to the highway account and 2.86¢ goes to the transit account.
The gas and diesel taxes have not been raised, or reduced, since 1993.
Partly because of the long freeze in the fuels taxes, federal highway spending has been outrunning Trust Fund receipts for years.
To keep the fund whole, Congress since 2008 has turned to using multiple transfers from elsewhere, generally the Treasury’s general fund.
According to the American Association of State Highway and Transportation Officials, the total of such transfers since 2008 is $272 billion. That includes $118 billion in the Infrastructure Investment and Jobs Act, signed into law last Nov. 15.
Another part of Biden's gas-tax push is a call to states to suspend their gas taxes, which he said average 30¢ per gal.
Some states, including Connecticut, Maryland and New York, have instituted temporary pauses in their fuel levies. Other states have implemented different types of fuel-tax help. Biden said, "States are now in a strong position to be able to afford to take some of these actions."
Industry Groups' Criticism
Construction and engineering groups criticized Biden’s plan, some in sharp terms. They contend the 90-day suspension would have little benefit to motorists and they worry about the threat to the trust fund.
Stephen E. Sandherr, Associated General Contractors of America chief executive officer, blasted Biden’s proposal as “desperate” and “irresponsible.”
Sandherr said in a statement that the proposal “won’t provide relief at the pump, but will add to the pain of using America’s roads and rails.”
He said it “would leave a massive hole in the federal Highway Trust Fund…that would need to be filled with new taxes or additional deficit spending.”
Linda Bauer Darr, president and CEO of the American Council of Engineering Cos., said in a statement, “The minimal relief from a gas tax holiday will be temporary and such action will undercut the new infrastructure program that will play such a critical role in restoring economic growth.”
Darr said, “We are also concerned where the ‘other revenues’ could be found to offset any proposed ‘holiday.’ " She added that “we oppose any attempts to further erode confidence in the Highway Trust Fund.”
Michele Stanley, National Stone, Sand & Gravel Association vice president of government and regulatory affairs, told ENR via email, "Taking away a mandatory funding stream and replacing it with general fund transfers that are subject to congressional appropriations and competition with other needs, causes greater uncertainty for state departments of transportation and project planners."
Dave Bauer, American Road & Transportation Builders Association president and chief executive officer, said in a statement, “Senior administration officials know full well the 18.4¢-per-gal federal gasoline tax is not the factor driving increased prices at the pump.”
Bauer said a recent ARTBA analysis of changes—up or down—in gas tax rates in 34 states between 2013 and 2021 showed that only 18% of an increase or decrease was passed through to motorists in the two weeks after a tax rate change occurred.
Democrats' Reactions
The fate of Biden's proposal is in the hands of Congress. The tight legislative calendar in this election year will make it difficult to pass controversial bills.
Biden has backers among Capitol Hill Democrats. For example, Rep. Richard Neal (D-Mass.), chairman of the tax-writing Ways and Means Committee, said, "This is a global crisis that the oil companies have exploited." Neal added, "President Biden and I share the pain Americans are feeling and I look forward to working together to bring down costs."
House Speaker Nancy Pelosi (D-Calif.) said Democrats want to see lower gas prices and said Democrats will build on House-passed legislation aimed at oil companies price "gouging" and reducing fuel and food costs.
But on the specifics of a gas tax pause, Pelosi offered a more neutral comment. “We will see where the consensus lies on a path forward for the President’s proposal in the House and the Senate," she said.
House Transportation and Infrastructure Committee Chair Peter DeFazio (D-Ore.) was critical of Biden's gas tax proposal.
DeFazio said, “Although well-intentioned, this policy would at best achieve only minuscule relief while blowing a $10-billion hole in the Highway Trust Fund that would need to be filled if we want to continue to fix crumbling bridges, address the spike in traffic deaths and build a modern infrastructure system.”
Regarding another part of Biden’s proposal, DeFazio added that “encouraging state governments to suspend their gas taxes undermines the impact of the [Infrastructure Investment and Jobs Act] by reducing funds available to states to spend on infrastructure improvements.”
Instead, he pointed to the Stop Gas Price Gouging Tax and Rebate Act, which he sponsored. It would establish a windfall profits tax on corporations and send the revenue to taxpayers in the form of a rebate.
Republicans Hammer the Plan
Unsurprisingly, congressional Republicans attacked the Biden plan.
Sen. Mike Crapo (Idaho), ranking GOP member on the tax-writing Finance Committee, said in a statement, “A gas tax holiday is a political gimmick that would do little to nothing to stop skyrocketing gas prices or inflation. This ineffective stunt would offer little to no relief at the pump, threaten critical infrastructure investments and potentially worsen our country’s debt situation.”
House Ways and Means' top Republican, Kevin Brady (Texas), said in a tweet, “With families crushed by #BidenFlation, desperate #POTUS seeks temp, tiny 18 cents/gal tax holiday. The pain of #GreenNewDeal & Biden attacks on U.S. oil/gas coming home to roost.”