Trump Wants a Gas Tax Holiday. Here’s the Crash Course.
President Trump has a new pitch for lowering prices at the pump: suspend the federal gas tax.
It sounds simple. Stop collecting the tax. Gas gets cheaper. Drivers feel relief. Politicians get to say they did something.
But the reality is less satisfying. The federal gas tax is small enough that suspending it would save most drivers only a few dollars per fill-up. It is also big enough that suspending it would drain billions from the main federal fund that pays for roads, bridges, highways, and transit.
Here’s the Crash Course.
What is the federal gas tax?
The federal gas tax is 18.4 cents per gallon on gasoline and 24.4 cents per gallon on diesel. The first federal gas tax was passed in 1932 (when it was 1 cent on every gallon of fuel) to help pay down the Depression era government deficit.
It has not been raised since 1993, which means inflation has steadily eaten away at its value.
In theory, it is a user fee: drivers help pay for the transportation system they use.
What does it pay for?
The money goes into the Highway Trust Fund, which helps pay for highways, bridges, roads, and public transit.
Gasoline and diesel taxes are the backbone of that fund. In fiscal year 2023, they made up 83 percent of Highway Trust Fund tax revenue.
So suspending the gas tax is not just “cutting a tax.” It is cutting one of Washington’s main transportation funding streams.
Can Trump do this himself?
No.
Congress created the gas tax, and Congress would have to suspend it. Trump can pressure lawmakers, endorse a bill, and claim the issue politically. But he cannot turn off the tax by executive order.
That makes this a congressional fight, not a presidential switch-flip.
Would Congress pass it?
Doubtful.
Some Republicans and Democrats have supported gas tax holidays before because gas prices are visible and politically painful. But leaders in both parties know the tradeoff: cutting the gas tax blows a hole in the Highway Trust Fund.
That is the basic dilemma. Everyone likes cheaper gas. Fewer lawmakers want to explain how they plan to pay for the roads after cutting the road money.
How much would drivers save?
Not much.
The maximum savings would be 18.4 cents per gallon. For a 15-gallon tank, that is $2.76 if every penny reaches consumers.
But every penny probably would not. The tax is collected upstream, and some of the savings could be absorbed before they reach the pump. One estimate found consumers might see closer to 13 cents per gallon—about $2 on a 15-gallon fill-up.
That is not nothing. But it is a coupon, not a cure.
Why wouldn’t prices fall by the full amount?
Because Congress does not set gas prices.
Gas prices are driven mostly by crude oil prices, refining costs, supply, distribution, and demand. Taxes are only one piece of the price.
A gas tax holiday can trim the edge. It cannot control the market.
What would it cost?
Billions.
A four-month suspension could cost the federal government roughly $8 billion in lost revenue, or more than $11 billion if diesel is included. A full-year suspension would cost much more.
Supporters could replace the lost money with general taxpayer funds. But that does not make the policy free. It just moves the cost somewhere else.
Haven’t we tried this debate before?
Yes.
President Biden pushed a federal gas tax holiday in 2022 when prices spiked after Russia’s invasion of Ukraine. It went nowhere in Congress.
Some states have tried their own versions, but states also face the same basic problem: less gas tax revenue means less transportation money, unless lawmakers replace it.
The Crash Course takeaway
A gas tax holiday is better politics than policy.
It would probably lower prices a little. Trump cannot do it alone. Congress would have to pass it. Drivers might save a couple bucks per fill-up. The Highway Trust Fund would lose billions.
So the real question is not whether a gas tax holiday would help at all.
It would.
The question is whether Congress wants to raid the road fund to buy a few months of pump-price relief.
Another example of nothing is free. Thanks for the reminder!
Another stupid idea from our stupid president. These were my thoughts initially as well and thanks Casey for clarifying with real numbers. As is the case always with Trump, it's politics over real solutions.