President Joe Biden called on Congress to suspend the federal gas tax to “bring families just a little bit of relief” as average gasoline prices exceed US$5 a gallon. The tax is 18.4 cents on regular gasoline and 24.4 cents on diesel. Biden’s proposal would rescind both taxes for 90 days.

Several states, such as Maryland and Georgia, have temporarily waived their state gasoline taxes to reduce the burden on consumers.

The Conversation asked four experts whether gas tax waivers are an effective way to provide economic relief to U.S. households, what revenue from the federal gas tax is used for and what other impacts these measures could have.

Not much relief

Jay Zagorsky, Senior Lecturer in Markets, Public Policy and Law, Boston University

As an economist who has studied gasoline prices, I doubt that waiving gas taxes will meaningfully lower prices at the pump. Russia’s invasion of Ukraine boosted gasoline prices dramatically, and with the summer driving season in full swing, politicians feel a need to show voters they are doing something. Cutting gas taxes makes great political theater, but as a few numbers show, it is an ineffective policy.

Government data shows that in an average day, the U.S. uses about 350 million gallons of gasoline. That is pretty close to the population of 333 million people, so on average the typical person uses about one gallon of gas per day.

Let’s assume the entire reduction of the gas tax is passed on to the consumer. That means average savings of just 18 cents a day, or $16.56 over 90 days. Sixteen dollars will buy you about two cheese pizzas. Given that before the pandemic the typical U.S. family spent about $2,100 on gas each year, $16 barely registers.

Moreover, we have some data on what happens during a gas tax holiday from when Maryland tried it a few months ago. According to the American Automobile Association, the average price of gasoline in Maryland just before the state’s gas tax holiday was $4.25 per gallon. Two days after the state stopped charging the gas tax, prices were $3.81. A 44-cent drop may look significant, but it’s not that simple.

First, not all of that decrease happened because of eliminating the gas tax. Neither Delaware nor the District of Columbia, both of which border Maryland, had waived their gas taxes. However, over the same time period, Delaware gas prices declined by 19 cents per gallon and Washington’s prices fell by almost 16 cents. These drops are partly due to falling oil prices. Florida, which is far from Maryland, saw a 16-cent drop per gallon over this same time period.

I believe the president’s proposal, unfortunately, will not provide much relief at the pump.