Biden's proposed gas tax suspension could actually worsen inflation, analysis shows
While the gas tax holiday may reduce prices at the pump, it will further increase demand for gasoline and other goods and services at a time when the economy has little capacity to absorb it," the blog post said. "The result could be even higher rates of inflation in 2023."
Suspending the gas tax for 10 months would also reduce revenue by about $20 billion, according to the CRFB. President Biden speaks with reporters before boarding Air Force One at Los Angeles International Airport after attending the Summit of the Americas, Saturday, June 11, 2022, in Los Angeles. Money from the tax is used to pay for the Highway Trust Fund, which covers expenses like highway construction and public transit. More than $42 billion is expected to flow into the Highway Trust Fund this year – more than three-fifths of which stems from the gas tax, according to the CRFB. A tax holiday would "significantly decrease" that revenue.
For months, the prices of all kinds of energy – gasoline, diesel fuel, natural gas, oil and more – have been a major driver behind, which surged 7% in December, the highest level since 1982. Energy costs have climbed more than 29% over the past year, in part due to lopsided supply and demand. Consumers are traveling more, but the supply side has not kept up with the demand.
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