That 18 cents doesn't really amount to a whole lot.
In the face of fuel prices not seen since 2022, President Trump has reached for one of the oldest levers in the political toolkit — the gas tax holiday — offering American drivers a symbolic reprieve that experts say falls well short of the wound it is meant to dress. The federal gas tax, just 18.4 cents per gallon, was never designed to absorb the shock of a geopolitical rupture closing one of the world's most vital oil corridors. What the proposal reveals, perhaps more than it resolves, is the gap between the tools governments hold and the scale of the forces they are trying to tame.
- Gas prices have surged to $4.52 a gallon — the highest since 2022 — driven not by tax policy but by the near-closure of the Strait of Hormuz, leaving drivers paying $18 to $25 more per fill-up than before the Iran conflict began.
- Trump's proposed federal gas tax suspension would save the average driver just $2 to $3 per tank, a fraction of the pain already being felt, prompting analysts to call the measure more political gesture than practical remedy.
- Any suspension must clear a divided Congress, where partisan gridlock and approaching midterm elections make passage uncertain, while the monthly cost to the Highway Trust Fund would reach $2.1 billion in lost road-maintenance revenue.
- Some states — Georgia, Indiana, and Utah — have moved faster with local tax waivers, delivering larger per-gallon savings since state fuel taxes can run as high as 60 cents, with Indiana briefly pushing prices below four dollars at some stations.
- Analysts warn that cutting taxes during a supply crisis may backfire, removing the price signal that nudges drivers toward conservation and potentially sustaining the very demand pressures that are keeping fuel expensive.
President Trump stepped before cameras on Monday with a simple proposition: suspend the federal gas tax and give American drivers relief at the pump. The logic sounds intuitive — remove the government's cut and prices fall. But the arithmetic tells a more complicated story.
Gas was averaging $4.52 a gallon that day, up roughly $1.54 since late February, when U.S.-Israeli military action disrupted global energy markets and effectively choked off flow through the Strait of Hormuz. The federal gas tax stands at 18.4 cents per gallon — money that funds the Highway Trust Fund and the nation's road infrastructure. Suspending it, analysts say, would save a typical driver about two dollars per fill-up. The same driver is already paying eighteen to twenty-five dollars more per tank than before the war began. Andrew Lautz of the Bipartisan Policy Center put it plainly: the higher prices climb, the less impact an 18-cent cut actually has.
Even if enacted, the suspension would bring regular gas to roughly $4.34 — still nearly the price from early May, when fuel was already far above pre-conflict levels. The real source of the crisis is the Strait of Hormuz, and no tax holiday reopens it.
The path to enactment is itself uncertain. Congress must approve any suspension, a difficult ask in a polarized Washington with midterms approaching. Senator Josh Hawley has pledged to introduce legislation, but passage is far from guaranteed. The fiscal cost would run to $2.1 billion a month in foregone highway revenue.
Some states have already acted with greater effect. Indiana, Georgia, and Utah have waived local fuel taxes — which can range from 15 to 60 cents per gallon — delivering more meaningful savings than the federal option. Indiana saw prices dip below four dollars at some stations after suspending its use and excise taxes. Yet even state lawmakers are wary of draining the funds that keep roads intact.
Petroleum analyst Patrick De Haan raised a subtler risk: tax relief during a supply crisis may actually deepen the problem. Higher prices naturally push consumers toward conservation — less driving, more carpooling, greater transit use. Cut the price signal and that behavioral shift stalls. Demand holds steady, supply remains constrained, and prices stay elevated. The very act of easing the pain, De Haan suggested, could prolong it.
President Trump stood before cameras on Monday with a straightforward pitch: suspend the federal gas tax and give American drivers a break from the pump. The idea sounds clean, almost obvious—remove the government's cut and prices should fall. But the math tells a different story, one that reveals how limited a tool tax policy actually is when the real problem lies elsewhere entirely.
Drivers are indeed hurting. A gallon of regular gas was averaging $4.52 that Monday, a jump of roughly $1.54 since late February, when conflict between the U.S. and Israel disrupted global energy markets. These are the highest prices Americans have faced since 2022. The federal government collects 18.4 cents per gallon on gasoline and 24.4 cents on diesel—money that funds the Highway Trust Fund and keeps the nation's roads maintained. Trump's proposal would temporarily lift that levy, letting prices fall by whatever amount that 18 cents represents, then phase the tax back in once fuel costs decline.
The problem is scale. If the suspension went through, a driver filling up a sedan at national average prices would save roughly two dollars per tank. Meanwhile, that same driver is already paying eighteen to twenty-five dollars more per fill-up than they were before the Iran war began. "The irony of a gas tax suspension is that the higher prices go, the less of an impact it has," said Andrew Lautz, director of tax policy at the Bipartisan Policy Center. A California driver with an SUV might see savings between $2.36 and $3.09 per fill-up—meaningful money, certainly, but still leaving them paying twenty-four to thirty-two dollars more per tank than before the conflict started. Patrick De Haan, a petroleum analyst at GasBuddy, was blunt: "That 18 cents doesn't really amount to a whole lot."
Even if the suspension were enacted, it would reduce regular gas to $4.34 a gallon and diesel to $5.39—roughly the prices from early May, when fuel was still nearly half again as expensive as it had been before the war. The real driver of current prices isn't federal policy. It's the virtual shutdown of the Strait of Hormuz, a chokepoint through which enormous quantities of global oil normally flow. That supply constraint is the actual problem, and no tax holiday changes it.
Then there are the practical obstacles. Congress would need to approve any suspension—a high bar given the partisan divisions in Washington and the approaching midterm elections. Senator Josh Hawley of Missouri, a Republican, said he planned to introduce legislation to do so, but passage is far from certain. The suspension would also drain federal coffers by roughly $2.1 billion a month in lost revenue, money that would otherwise go toward maintaining highways and bridges. Some states have already moved faster, with Georgia, Indiana, and Utah waiving their local fuel taxes. Because state taxes range from 15 cents to 60 cents per gallon, those suspensions can provide more meaningful relief than the federal option. Indiana saw gas prices drop below four dollars at some stations after waiving its use and excise taxes, giving drivers a nearly 60-cent discount. But even state lawmakers are hesitant, worried about depleting the funds needed to keep roads in decent condition.
De Haan raised a subtler concern: tax cuts might actually make the problem worse. When fuel prices spike, consumers naturally start thinking about conservation—carpooling, using transit, driving less. Higher prices create an incentive to change behavior. But if politicians cut taxes to ease the pain, they remove that incentive. Demand stays high, supply stays constrained, and prices stay elevated. "Politicians who may be looking to help their constituents fight against rising fuel prices are also disincentivizing changes that Americans would probably start to employ given the higher prices of fuel," De Haan said. The risk, he added, is that tax cuts stimulate demand rather than encouraging the conservation that a genuine supply crisis demands.
Citações Notáveis
The irony of a gas tax suspension is that the higher prices go, the less of an impact it has.— Andrew Lautz, director of tax policy at the Bipartisan Policy Center
Reducing or limiting taxes may actually do more to further the imbalance between supply and demand, and politicians risk stimulating demand instead of disincentivizing it.— Patrick De Haan, GasBuddy petroleum analyst
A Conversa do Hearth Outra perspectiva sobre a história
So if the tax suspension only saves two dollars per fill-up, why is Trump proposing it at all?
Because it's visible and simple. People see gas prices and feel pain. A president can point to a tax cut and say he's doing something. The fact that it barely moves the needle doesn't matter politically—the gesture does.
But you said the real problem is supply, not the tax. Can't the government do anything about that?
Not quickly. The Strait of Hormuz is blocked by geopolitics, not policy. That's a months-long problem, maybe longer. A tax cut is something a president can announce on Monday.
What about the states that already cut their taxes? Indiana got prices below four dollars.
Right, but Indiana's state tax was much higher—60 cents a gallon. The federal tax is 18 cents. And even Indiana's drivers are still paying more than they were before the war. The tax cut helped, but it didn't solve the underlying problem.
De Haan mentioned that tax cuts might actually make things worse by keeping demand high. How does that work?
When prices spike, people naturally start thinking about alternatives—carpooling, transit, driving less. That reduces demand, which eventually helps prices fall. But if you cut taxes and ease the pain, people stop thinking about alternatives. They keep driving normally. Demand stays high, supply stays tight, prices stay elevated. You've solved the symptom but worsened the disease.
So the best thing a government could do is... nothing?
Not nothing. But maybe not a tax cut. Maybe policies that actually address supply—diplomatic pressure on whoever's blocking the strait, investment in alternative energy, anything that shifts the underlying balance. A tax cut just delays the adjustment.