Why It Matters
A suspension of the federal gas tax would reduce revenues flowing into the Highway Trust Fund (HTF) and could affect federal highway and transit spending unless Congress offsets the loss, according to a new Congressional Research Service (CRS) report.
The federal gasoline excise tax stands at 18.4 cents per gallon, and the diesel tax at 24.4 cents per gallon, both unchanged since 1993. The HTF is the primary federal mechanism for financing highway and transit programs, and it already faces a structural imbalance in which projected outlays exceed projected revenues.
The report notes that the pass-through of a suspension to consumers is uncertain. Retailers and distributors may capture part of the savings, and distributional effects tend to favor higher-income households who drive more.
The Big Picture
The Trump administration has expressed interest in providing relief at the pump, and a federal gas tax suspension has been discussed as one mechanism, though no legislation suspending the tax has been enacted.
Surface transportation authorization, the law governing federal highway and transit spending, has expired and been extended, with a new multiyear reauthorization pending before Congress. A suspension would deepen the HTF's existing structural revenue shortfall, leaving Congress to decide whether to offset the revenue loss through general fund transfers, allow the HTF balance to decline, or reduce highway and transit spending.
The report describes a gas tax suspension as a blunt instrument for delivering consumer relief. Because savings may not be fully passed through at the pump, the benefit to drivers is not guaranteed even if the tax is lifted.
The report also notes that the HTF's structural imbalance predates any suspension proposal. Projected outlays have exceeded projected revenues for years, and Congress has relied on general fund transfers to keep the fund solvent, meaning a suspension would compound a pre-existing fiscal pressure rather than create a new one.
On the distributional side, the report observes that because higher-income households tend to drive more, the benefits of a gas tax suspension would not be evenly spread across income groups. Lower-income households, who spend a higher share of their income on fuel, would receive a smaller absolute benefit in dollar terms.
The Bottom Line
The pending surface transportation reauthorization gives Congress a near-term vehicle to address the HTF's structural imbalance. Any decision on a gas tax suspension will require Congress to weigh the HTF's revenue shortfall against the potential, and uncertain, consumer savings at the pump.
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