Full Breakdown
Proposed Suspension of the Federal Gas Tax Amid the Iran Conflict Sparks Policy Debate
5/20/2026, 2:02:42 AM
Proposed Federal Gas Tax Suspension
President Donald Trump has floated suspending the 18.4-cent per-gallon federal gasoline excise tax and the 24.4-cent diesel tax. The tax, created in 1932, has never been halted. Bills introduced by Sen. Josh Hawley (R-MO), Rep. Jeff Van Drew (R-NJ), and Rep. Brendan Boyle (D-PA) would pause the taxes for 90 days, 18 months, or until the national average price exceeds $4 per gallon, respectively.
Background: Iran Conflict and Fuel-Price Surge
U.S. and Israeli strikes on Iran in early March effectively closed the Strait of Hormuz, a key oil-shipping chokepoint. Brent crude jumped to $144 per barrel on April 7, later easing to about $105. Consequently, AAA reported a national gasoline average of $4.53 per gallon and diesel at $5.65—up roughly 52 % and 50 % since the conflict began. The Consumer Price Index rose 3.8 % year-over-year in April.
Key Legislators and Administrators
- President Donald Trump – called for suspension “until it’s appropriate.”
- Sen. Josh Hawley (R-MO) – sponsor of a 90-day holiday.
- Rep. Jeff Van Drew (R-NJ) – proposes an 18-month pause with gradual reinstatement.
- Rep. Brendan Boyle (D-PA) – suggests a price-triggered phase-out.
- House Speaker Mike Johnson (R-LA) – urges scrutiny of “any unintended consequences.”
- Senate Majority Leader John Thune (R-SD) – emphasizes reopening the Strait of Hormuz.
- U.S. Interior Secretary Doug Burgum – argues the savings would help consumers.
- White House spokesperson Taylor Rogers – noted the 18-cent reduction would be temporary.
Data on Prices, Tax Savings, and Funding Gaps
- The federal tax represents roughly 4 % of the $4.53 retail price.
- CRS calculations show that even a full 18.4-cent pass-through would leave gasoline $1.30 above February 23 levels.
- Historical studies find about 70 % of a tax cut reaches consumers.
- The Peter G. Peterson Foundation estimates the average driver would save < $9 per month.
- A three-month holiday would create a $10.5 billion shortfall in the Highway Trust Fund, plus $3 billion in additional interest, potentially accelerating insolvency by seven weeks.
- A 2025 survey found 40 % of U.S. highways are in need of repair.
Why It Matters: Consumer Relief vs. Infrastructure Funding
The modest per-gallon saving could modestly increase household cash flow, yet the loss of federal revenue threatens the Highway Trust Fund, which finances highways, bridges, and mass-transit projects. Experts warn the holiday could spur a buying rush, straining supplies while depriving the fund of essential financing.
Official Statements & Responses
- Trump: suspension “until it’s appropriate.”
- Burgum: “even 18 cents a gallon adds up pretty quickly… keeping money back in their pockets.”
- Johnson: “It’s important to examine any unintended consequences.”
- Thune: “The best way to get gas prices to normalize… is to get the [Strait of Hormuz] open.”
Criticism & Opposition
Tyson Slocum (Public Citizen) says removing the tax “won’t have a dramatic effect” and that the revenue loss is “dramatic.” Clark Williams-Derry (Institute for Energy Economics and Financial Analysis) doubts oil prices will fall and notes crumbling roads. Bloomberg Tax analysts label the holiday “too small to solve affordability, costly to transportation finance.”
Conflicting Reports & Gaps
- Pass-through estimates differ: CRS expects ~70 % of savings to reach consumers, while some analyses assume full 18.4-cent reduction.
- Consumer-savings figures range from < $9/month (Peterson Foundation) to $4.79-$14.31 over three months (Penn Wharton Budget Model).
- Funding impact projections vary between a $10.5 billion shortfall (CRFB) and a $6 billion deficit cited elsewhere.
- No data are provided on how quickly oil shipments would normalize if the Strait reopens.
Verbatim Quotes
- “It’s unlikely that oil prices, gasoline prices, diesel prices are going to fall back to where they were in February any time in the next couple months,” — Clark Williams-Derry, Analyst, Institute for Energy Economics and Financial Analysis
- “When you take away the retail gas tax, it’s not going to have a dramatic effect [for consumers],” — Tyson Slocum, Director, Energy Program, Public Citizen
- “In aggregate, if you take a look at the millions of gallons of gasoline that are consumed every day by Americans, even 18 cents a gallon adds up pretty quickly, in terms of keeping money back in their pockets,” — Doug Burgum, U.S. Interior Secretary
- “American workers and families deserve immediate relief and this legislation will do just that,” — Josh Hawley, U.S. Senator (R-MO)
- “The best way to get gas prices to normalize in my view is to get the [Strait of Hormuz] open,” — John Thune, Senate Majority Leader (R-SD)
- “any unintended consequences.” — Mike Johnson, House Speaker (R-LA)
What’s Next
Congress will debate the 90-day, 18-month, and price-triggered proposals, with some drafts including a gradual phase-in to avoid supply shocks. Lawmakers may pair any suspension with a back-fill mechanism for the Highway Trust Fund, while the upcoming midterm elections could shape the timing and scope of any action.
