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Industry Associations Speak Against Federal Gas Tax Suspension

Industry Associations Speak Against Federal Gas Tax Suspension

Following the decision by President Joe Biden to instruct Congress to suspend federal gasoline and diesel taxes for three months to alleviate some of the burden felt by consumers at the gas pumps, the National Association of Manufacturers (NAM) and the Associated General Contractors of America (AGC) made the following statements:

NAM’s President and CEO Jay Timmons said:

Our nation achieved historic progress with the Bipartisan Infrastructure Law, but this move is likely to derail its implementation by suddenly disrupting its funding, delaying critical projects that Americans desperately need and that are vital to manufacturers’ competitiveness. Our focus should be on increasing energy production here at home—to make manufacturers more competitive, to bring energy and gasoline prices down and to provide lasting relief for American families. We need the same smart, long-term approach that inspired the infrastructure bill to solve today’s energy challenges.

Since the beginning of this administration, we have provided specific solutions and recommendations for improving energy security and taking an all-of-the-above approach: restarting and expanding oil and gas leasing on federal lands, prioritizing funding and expediting permitting for traditional and emerging energy options, expanding critical mineral mining and processing, strengthening and diversifying clean energy supply chains, promoting regulatory predictability by refraining from revising air standards until previous ones are met, upholding the infrastructure law’s One Federal Decision policy and more. We would be in a better position now if these and other actions had already been taken, and the need to act has only grown more urgent. Manufacturers will continue doing everything in our power to be part of the solution.

Likewise, the chief executive officer of the Associated General Contractors of America, Stephen E. Sandherr, issued the following statement in response to Biden’s call to suspect the federal gas tax of 18.3 cents per gallon to offset gas prices that have risen by over $3 a gallon since 2020:

The President’s desperate proposal to suspend the federal gas tax won’t provide relief at the pump, but will add to the pain of using America’s roads and rails. That is because the irresponsible proposal, if enacted, would leave a massive hole in the federal Highway Trust Fund that pays for federal investments in road, bridge and transit improvement projects that would need to be filled with new taxes or additional deficit spending.

Fuel prices are rising for a variety of reasons, including the war in Ukraine and the fact demand is up while the White House has been cancelling pipeline projects and federal oil leases and discouraging long-term investments in new fossil fuel extraction. Those factors have led to a more than $3 per gallon increase in the price of fuel since 2020 and will not go away even if the federal fuel tax of 18.3 cents per gallon were to be temporarily waived.

Instead of helping motorists, this ill-conceived proposal will make the cost of shipping and commuting higher as growing congestion and worsening road conditions delay shipments, leave commuters stuck in traffic, damage vehicles and undermine economic growth. Ultimately, all taxpayers will be forced, via new taxes or additional deficit spending, to plug the massive revenue holes this desperate ploy will create. Congressional leaders have seen through this idea, Speaker Nancy Pelosi called this proposal “showbiz” and former President Obama and Senate Minority Leader Mitch McConnell called this idea a “gimmick.”

More broadly, it is hard to understand why the President is going to such great lengths to undermine the potential benefits of his signature bipartisan achievement, the infrastructure measure he signed into law last year. His administration has already sought to hobble the measure with restrictive labor mandates, unworkable domestic sourcing guidelines and time-consuming new regulatory reviews. Now, by implying that the federal gas tax is a significant factor in the price of fuel, he is undermining support for the primary funding source for those infrastructure investments.

We hope this proposal goes nowhere but we take nothing for granted. That is why will take every possible step to educate members of Congress about why this proposal must not pass.

The Associated Press issued a look at how the proposed gas tax holiday would work and what impact it might have on gas prices and the highway trust fund (by Matthew Daly):

HOW MUCH MONEY WOULD DRIVERS SAVE?

It’s unclear exactly how much drivers would save; a lot depends on whether states lower or suspend their own gas taxes, as Biden has suggested. But it’s not clear how many would do so.

There’s also the question of whether the full savings would be passed on to drivers.

Still, recent studies indicate that a gas tax holiday would result in lower prices.

A Penn Wharton Budget Model analysis says recent suspensions of state gasoline taxes in Maryland, Georgia and Connecticut were mostly passed onto consumers in the form of lower gas prices. About 72% of tax savings in Maryland were passed onto consumers, up to 65% in Georgia and up to 87% in Connecticut, the report says.

However, the price reductions were not sustained during the entire tax holiday, and prices rose once the holiday was lifted, the report said.

HOW MUCH WOULD A GAS TAX HOLIDAY COST?

The administration says the three-month pause would cost about $10 billion. The lost revenue would otherwise go to the Highway Trust Fund, which finances most federal government spending for highways and mass transit.

Critics of the tax holiday say that could lead to decreased spending on roads, bridges and other infrastructure that are the hallmark of the Biden presidency. But the White House says the money could be transferred from other government accounts and that infrastructure remains a top priority for the president.

If the holiday is extended, as some experts expect, the cost could be tens of billions higher and could jeopardize administration efforts to build and maintain roads and bridges.

Even a temporary gas tax holiday “sets a bad precedent and undermines the funding mechanism in the infrastructure investment law that has been the signature policy achievement of the Biden presidency,″ said Dave Bauer, president and CEO of the American Road & Transportation Builders Association.

WHAT DOES CONGRESS SAY?

Lawmakers from both parties expressed skepticism, or even outright opposition.

House Speaker Nancy Pelosi said lawmakers “will see where the consensus lies on a path forward” for Biden’s plan, but she and other congressional Democrats have long worried that suspending the gas tax would allow oil companies to reap additional profits with no guarantee the savings would be passed along to consumers.

Rep. Peter DeFazio, D-Ore., chairman of the House Transportation and Infrastructure Committee, said he opposes the tax suspension in part because it provides minuscule relief and could become permanent. “You know what happens in this town: you suspend the tax, it’s gone forever,” he said Wednesday. “I do not want to compromise the highway trust fund. We have not raised the gas tax since 1993, and it’s worth 6 cents now compared to 1993. No, I do not support in any way degrading that contribution to rebuilding our crumbling infrastructure.”

Senate Republican leader Mitch McConnell, meanwhile, mocked the gas tax holiday as an “ineffective stunt,” while Rep. Cathy McMorris Rodgers, R-Wash. called it a “political band-aid” that would do little to lower costs at the gas pump.

The plan also could have long-term consequences on road safety and improvements by diverting funds away from infrastructure projects across the country, added McMorris Rodgers, the top Republican on the House Energy and Commerce Committee. “Under President Biden’s proposal, people will be forced to drive on unsafe, potholed roads to get the gas they can’t afford,” she said.

House Majority Leader Steny Hoyer, D-Md., said he was unsure if Democrats have the votes to pass it. “We haven’t counted, so we don’t know yet.″

WHAT DO EXPERTS SAY?

Marc Goldwein, a senior policy director for the nonpartisan Committee for a Responsible Federal Budget, said the gas tax holiday would not make a dent in inflation or produce big savings at the pump. He also worried it may not be temporary, as the White House suggested.

“Do we really think in three months gas prices will be down? Are we going to raise prices right before an election?″ Goldwein asked in an interview. A long-term suspension of the gas tax would be catastrophic to administration efforts to build and maintain roads and bridges, he said.

But Mark Zandi, chief economist at Moody’s Analytics, said high gas prices are “the number one financial problem for many American households,″ especially those with low incomes. While small, a gas tax holiday “is a step to help these households,″ Zandi said. “They’re under a lot of pressure because of the high gasoline prices. And this is intended to provide some temporary relief. I mean, it’s pretty obvious why the administration is focused on this.″

Still, Zandi said the plan “is not a slam-dunk solution. It’s on the margin.″

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Associated Press writers Josh Boak, Nathan Ellgren and Kevin Freking contributed to this story. Copyright 2022 The Associated Press. All rights reserved.

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