Why It Matters
The Iran conflict has created bipartisan urgency around gas tax relief. U.S. and Israeli military operations against Iran beginning in February 2026, and Iran's subsequent disruptions to Persian Gulf shipping, sent oil prices surging. By mid-May, American consumers were paying dramatically more at the pump than they were just three months ago.
With gasoline prices up more than $1.50 per gallon since February, President Trump and multiple members of Congress have rallied around suspending the 18.4-cent federal excise tax on gasoline, a move that has never actually been done in the nearly 70 years since Congress established the Highway Trust Fund. A new Congressional Research Service report lays out why the idea is more complicated than its appeal suggests.
The CRS report emphasizes the federal gas tax is the financial backbone of the nation's highway and transit system, and it is already on shaky ground.
The Big Picture
The federal gas tax, set at 18.4 cents per gallon, has not been raised since 1993. Because it is not indexed to inflation, CRS calculates it has lost approximately 74 percent of its purchasing power since then. Between fiscal years 2015 and 2024, fuel taxes accounted for 82 percent of Highway Trust Fund revenue, with the gas tax alone accounting for 58 percent.
Of the 18.4 cents collected per gallon, 18.3 cents flow to the Highway Trust Fund, which finances federal highway construction, highway safety programs, and mass transit. The remaining 0.1 cent goes to the Leaking Underground Storage Tank (LUST) Trust Fund, which helps states clean up groundwater contamination from petroleum leaks.
The Highway Trust Fund was already in trouble before anyone proposed a gasoline tax policy change. The Congressional Budget Office projects that the mass transit account will approach zero in fiscal year 2027 and the highway account will approach zero in fiscal year 2028. Expenditures have consistently exceeded revenue since fiscal year 2008. A fuel tax suspension in 2026 would accelerate that timeline.
The Bipartisan Policy Center estimates that suspending the gas tax from May through September 2026 would reduce Highway Trust Fund revenue by $17 billion. If that revenue is not replaced through a transfer from the Treasury's general fund, states and localities could face slower federal reimbursements for highway and transit projects, and some projects could be delayed or canceled outright.
Several bills currently before the 119th Congress attempt to address this by requiring a compensating general fund transfer. H.R. 3768, H.R. 7919, H.R. 8572, S. 4032, and S. 4485 all include language requiring transfers equal to the revenue lost by both the Highway Trust Fund and the LUST Trust Fund. But the CRS report also notes that those transfers would increase the federal budget deficit.
The Federal Gas Tax Suspension's Price Relief Problem
The relief on offer is modest relative to the problem. Even a full pass-through of the 18.4-cent suspension to consumers would leave gas prices more than $1.30 per gallon above where they were on February 23, 2026, according to CRS calculations based on Energy Information Administration data. At current elevated price levels, the federal fuel tax represents roughly 4 percent of the retail price of gasoline. And there is no guarantee consumers would see the full 18.4 cents.
The federal gas tax is not collected at the pump. It is collected upstream from roughly 850 registered fuel suppliers, distributors, refiners, and blenders. Economic studies of state-level gas tax suspensions have consistently found that less than the full tax reduction is passed on to consumers. One widely cited study found that about 70 percent of the savings reached consumers through lower prices. Subsequent research has confirmed that pattern.
Several of the current congressional proposals include language directing that consumers "immediately receive the benefit of the reduction in taxes" and encouraging the Treasury Secretary to use available authorities to enforce that outcome. But CRS flags a practical problem. Enforcing such a provision would require estimating what prices would have been in each locality without the suspension, a calculation complicated by the many other market forces affecting fuel prices.
Political Stakes
For the Administration
The gas tax holiday is an opportunity to demonstrate responsiveness to an economic pain point that is visible every time a voter fills up their tank. The political logic is straightforward. The policy logic is less so.
For Republicans
The administration cannot suspend the gas tax on its own. That requires an act of Congress. And within the Republican conference, there is unease. The Highway Trust Fund's precarious finances mean that any suspension without a general fund backstop risks triggering the very infrastructure disruptions Republicans spent years promising to fix. If a general fund transfer is included, the deficit implications create a separate political problem, particularly for members who have made fiscal restraint a central message.
For Democrats
Gas tax relief is broadly popular, and opposing it carries risk. But some Democrats have raised concerns about ensuring savings actually reach consumers rather than being absorbed by fuel suppliers.
For the Public
If the Highway Trust Fund approaches insolvency faster than projected, federal reimbursements to states slow down, and road and transit projects stall. And the LUST Trust Fund, which EPA relies on to fund groundwater cleanup at leaking petroleum sites, would face depletion if the gas tax revenue it depends on disappears without replacement, leaving states with fewer resources to protect drinking water.
The Bottom Line
Congress has proposed suspending the federal gas tax many times before, in response to the COVID-19 pandemic, the Great Recession, and various price spikes. It has never done it. The reason is the same each time. The Highway Trust Fund cannot absorb the revenue loss without consequences, and replacing that revenue costs money the federal budget does not have to spare.
The 2026 version of this debate is playing out against a more urgent backdrop than most, with gas prices elevated by a genuine geopolitical shock. But the CRS report's core message is that a federal gas tax suspension is not a clean solution. It would deliver partial relief at best, carry a price tag measured in billions, and arrive at a moment when the fund it draws from is already running out of runway.
Access the Legis1 platform for comprehensive political news, data, and insights.