Senate Democrats Consider Pausing Gas Tax to Drive Down Prices at the Pump: Economists Say, “Bad Idea”

By Yehudit Garmaise

As gas prices continue to skyrocket, Democratic lawmakers are considering a federal “gas tax holiday,” which would temporarily suspend the gas tax of approximately 18 cents per gallon until January 2023.

Democrat lawmakers, many of whom fear that skyrocketing U.S. inflation and spiking gas prices may cause them to lose votes in the midterm elections on Nov. 8, are expected to discuss pausing taxes at the pump at lunch on Tuesday, the Washington Post reports.

Many Congressional leaders who know that their reelections largely depend on their abilities to control inflation are eager to launch measures that provide consumers with relief.

“Although the tax holiday may provide temporary relief to ever-rising gas prices, pausing taxes is just going to make consumers buy more gas than they would have,” explained a frum professor of finance at the University of California Los Angeles. “Instead of paying taxes to the government, consumers will end up paying foreign oil producers, who will note high prices Americans are willing to pay for gas and charge accordingly.”

Larry Summers, a former treasury secretary, a top White House economist under previous Democratic administrations, and a former president of Harvard University, called the idea of a gas tax holiday “short-sighted, ineffective, goofy and gimmicky,” because it would merely boost demand.

In addition, pausing the gas tax also does not support Democrats’ often-repeated argument that Americans should reduce their use of gasoline because it is bad for the environment, the finance professor and Summers both pointed out.

On Capitol Hill, top aides to Democrats also debate whether the tax holiday could provide meaningful relief to consumers: or whether the temporary suspension of gas taxes would merely create an opportunity for foreign oil producers to charge higher prices. 

In addition, politicians hesitate to lower prices, only to later to raise them, as no elected officials want to be seen as causing prices to rise, especially as the midterm elections draw nearer.