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By Cecile Entleitner, Senior Associate,
Blakey & Agnew
The significant increase in gas prices over the past few months has been widely reported in the news and has likely impacted anyone who drives a car, truck, or uses ride-sharing services. According to AAA, the current national average gas price is nearly $5 per gallon, with some West Coast states seeing averages over $6. In an effort to provide relief to consumers, President Biden on June 22 called on Congress to suspend the federal excise tax on gasoline for three months through September 2022. The proposal also requests states take similar action by temporarily suspending their own taxes on gas and diesel and urges oil refinery companies to increase capacity. In a fact sheet issued by the White House, President Biden acknowledges that a gas tax holiday alone will not mitigate recent cost increases but believes it would provide Americans “a little extra breathing room.”
The federal excise tax, which has remained at the same rate since 1993, is 18.4 cents per gallon for gasoline and 24.4 cents per gallon for diesel. Most of this revenue is deposited into the Highway Trust Fund (HTF) to support infrastructure investments. While it remains a critical, dedicated revenue source for infrastructure projects, HTF funding alone has been insufficient to cover our nation’s growing infrastructure needs. For several years, the HTF has been supplemented by transfers from the Treasury’s General Fund to account for these shortfalls. Most recently, the Bipartisan Infrastructure Law provided a $118 billion transfer, which is expected to extend HTF solvency through 2027. The White House estimates the 3-month gas tax holiday would decrease HTF revenue by roughly $10 billion and proposes the cost be offset through other federal revenues.
The proposal has already been met with opposition from Republicans, several Democrats, as well as industry groups. A coalition of stakeholder organizations representing manufacturers, construction contractors, and other transportation groups sent a letter to President Biden warning that a gas tax holiday could create funding uncertainty and impact long-term project planning efforts at the state and local level. House Transportation and Infrastructure Committee Chairman DeFazio (D-OR) expressed similar concerns, calling the proposal “well-intentioned,” but stating such a policy would “at best achieve only miniscule relief while blowing a $10 billion dollar hole in the Highway Trust Fund.” Instead, he advocated for the passage of legislation
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he introduced earlier this year, the Stop Gas Price Gouging Tax and Rebate Act. The bill would impose a new excise tax on oil company profits, which would subsequently be distributed to consumers as a tax rebate. Republicans have argued that the benefits of a fuel tax suspension passed on to consumers would be minimal and have referred to the proposal as a “gimmick,” with Senate Republic Whip Thune (R-SD) stating it was “dead on arrival” in Congress.
While the President’s call for a tax holiday has been the most prominent proposal, lawmakers have introduced several other measures recently that seek tax incentives intended to benefit the transportation industry. The Modern, Clean, and Safe Trucks Act, sponsored by Reps. LaMalfa (R-CA) and Pappas (D-NH), would repeal the existing 12 percent excise tax on the purchase of new heavy-duty trucks, trailers, and tractors. The bill sponsors note that this tax can add more than $30,000 to the price of a new vehicle, arguing its repeal would incentivize the purchase of newer, safer, and more environmentally friendly trucks. Legislation introduced by Rep. Ryan (D-OH), the Commercial Vehicle Fleet Retreaded Tire Utilization Reinvestment and Recovery Act, aims to increase demand for retreaded tires – rather than the purchase of new, less-sustainable tires – by providing tax deductions. The proposal is supported by several trucking and tire manufacturing companies.
In addition to these tax measures focused on equipment, lawmakers have proposed incentives to support the trucking workforce. The bipartisan Strengthening Supply Chains Through Truck Driver Incentives Act, sponsored by Reps. Spanberger (D-VA) and Gallagher (R-WI), seeks to improve driver recruitment and retention by establishing a tax credit of up to $7,500 for commercial truck drivers and up to $10,000 for new drivers enrolled in a registered apprenticeship program.
Blakey & Agnew, LLC is a public affairs and
communications consulting firm based in
Washington, DC.
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