What a gas tax holiday could mean for Americans

Yahoo Finance anchors discuss President Biden’s plead to Congress for a gas tax holiday.

Video transcript

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BRIAN CHEUNG: President Joe Biden announced yesterday that he will call for a suspension of both federal and state gas taxes through September, which the administration says will reduce the cost of a gallon of gas by around $1. Let's bring in Yahoo Finance's senior columnist, Rick Newman, along with our autos correspondent, Pras Subramanian. Lots to unpack here, but let's start off with you, Rick. This needs congressional authorization. This is not something the president can just do. You think it's going to happen?

RICK NEWMAN: Yeah, I'm not sure there is that much to unpack because Congress is just not going to approve this. This is a familiar problem for Biden. He can't even get all Democrats to back it. They want other things. Joe Manchin, the veto king in the Senate, says we should not be adding to the deficit. That, in itself, might push up inflation. It would take money away from the Highway Trust Fund.

So Biden has a talking point. He need to show voters he cares. He needs to show voters he has some kind of plan to do something about gas prices at 5 bucks. This is not going to pass, however.

PRAS SUBRAMANIAN: So, Rick, I mean, I have to wonder, the reason why a lot of his own party is not on board is because it's not that effective, right? I mean, talk about a gallon-- a dollar per gallon. I don't think that's actually true.

BRIAN CHEUNG: It's even, by the way.

PRAS SUBRAMANIAN: Right.

BRIAN CHEUNG: It's even.

PRAS SUBRAMANIAN: So we have a tweet. Patrick De Haan of GasBuddy actually crunched the numbers. And he's found that per week, right, a pickup truck owner would save $5 a week, normal driving. Minivan, $3.68. Full-size car, 3 bucks. A compact, $2.21. That's the weekly savings that you get for an average driver.

RICK NEWMAN: I mean--

BRIAN CHEUNG: Anything is anything, though, right? I mean, but as you point out, Rick, this is maybe perhaps just the Biden administration showing that they're going to try to do something, even if they don't accomplish it if Congress doesn't ultimately pass this thing.

RICK NEWMAN: There's politics behind this as well. So there are some members of Congress who happen to be in very tight reelection races, Democrats-- Mark Kelly the Senator from Arizona is one of them. He sponsors a bill that would do this. These Democrats who are in tight races need something to tell their voters. And that is part of why Biden is doing this. He's giving some top cover to these endangered Democrats in Congress so they can at least tell voters, I want to do something to help.

BRIAN CHEUNG: But if Congress doesn't do something, is this Biden throwing a Democratically controlled Congress under the bus?

RICK NEWMAN: I think the Democratically controlled Congress is throwing itself under the bus. I mean, we've seen this going all the way back to Build Back Better last year. The Democrats, with their very small majorities, they only passed one big thing that was a Democratic bill. That was the American Rescue Plan, which now doesn't look so great because that may have contributed to 8.6% inflation right now. So much else they just can't get done and they can't even agree among themselves.

BRIAN CHEUNG: Well, again, and the overall question here is about headline inflation, right? Because oil prices are, yes, being felt at the pump. But it's also the reason why everything has gotten more expensive. I guess my question to you, Pras, is, do you think this would have, even if it does get passed-- let's just assume that happens. Do you think that would have the impact of actually lowering inflation? Because maybe lower gas prices actually incentivize people to get out more. Maybe take that extra trip this summer.

PRAS SUBRAMANIAN: Get that circle going. I mean, the other factor is, are they going to pass on the savings, like the refiners, to the consumer, right? They might just pocket that, keep the gas prices the same. You'd be paying the same amount of money. And inflation continues, or at least, stays where it is right now. So I think-- Rick, I think you kind of hit it in the head. It's like, this is the political sort of move to say-- Biden can say, I'm doing something here. I'm addressing these problems, from the pain at the pump. But in reality, what's really happening? Not much.

BRIAN CHEUNG: Yeah, and you bring up a good point, too, which is that it's actually, a lot of this falls on the actual gas stations themselves, too, in terms of how they want to preserve-- do they want to preserve their margins if this gas tax does actually bring the price down? Well, if a lot of people are still going to the pump because they want to take one more vacation, maybe they keep the prices where they're at right now, which makes that $1 estimate a little bit shaky. But--

RICK NEWMAN: I have no idea where they get that $1.

BRIAN CHEUNG: --there's a lot of moving parts.

RICK NEWMAN: Just so people understand, the federal gas tax is $0.184 per gallon. That's $0.24 for diesel. So how do you take away a tax of $0.18 a gallon and turn that into $1 per gallon savings? I'm mystified by that math.

PRAS SUBRAMANIAN: Yeah, I mean, are there that many state and local taxes that are going on? But Rick, I've got a question for you. What if they actually approve the pipe-- a magic pipeline, that TransCanada pipeline? Does that do anything? Is that a thing that you can-- like, a political ploy you can throw out there?

BRIAN CHEUNG: Now we're just going into a hole once again.

RICK NEWMAN: Oh, there are a lot of voters who think the reason gas prices are so high is because Biden killed the Keystone XL pipeline. The Keystone XL-- the short answer is that wasn't even built. There was no oil flowing through that pipeline. And he didn't kill a pipe-- an active pipeline. He just-- the Biden administration just did not approve the permit for it. Oil prices are set in a global market. People don't want to believe this. People want to think that somehow, the president has this lever. He pushes gas prices up. He pushes gas-- it doesn't work that way.

BRIAN CHEUNG: And that's an assumption that has been made over many, many decades, although I guess what's different about this oil shock and the 1970s oil shock is that America is a much larger producer than it was in the 1970s, which makes kind of the administration's posturing on the oil industry a lot more relevant.