Biden's Gas Tax Holiday Proposal Faces Chilly Reception From Democrats

President Joe Biden is moving closer to requesting Congress to institute a federal gas tax holiday to arrest the flight of surging gas prices. But many Democrats are opposed to the plan, fearing it will be a windfall for energy companies without bringing down prices.

On Wednesday, Biden was reportedly weighing the idea of announcing a three-month federal gas tax holiday, as well as asking states to participate by waiving their own gas taxes. The federal tax on gasoline is 18.4 cents per gallon and 24.4 cents per gallon for diesel fuel. State gas taxes vary, and three -- Connecticut, Georgia and Maryland -- have already implemented state gas tax holidays.

Under Biden's plan, no tax would be paid at the pump until September, after the busy summer travel season for Americans. But to fund the move, the administration would be required to borrow money from the federal highway trust fund. An administration official who spoke to Politico said that this move would be unlikely to impact any major road construction or repair projects already underway.

Gas prices have been one of the leading drivers of inflation in recent months, particularly since the beginning of Russia’s war in Ukraine in February. The price currently sits just shy of $5 a gallon nationally but is well beyond that marker in some states, according to the American Automobile Association.

Democrats in Congress were quick to throw skepticism at the proposal. On Tuesday night, Sen. Tom Carper, D-Del., called the proposal "shortsighted and inefficient" as a way to provide relief to consumers. He encouraged Biden to seek out alternative solutions to bring down prices at the pumps.

His dismissal of Biden's proposal follows an earlier rejection by Speaker of the House Nancy Pelosi, D-Calif. In April, she voiced concerns that oil and gas companies would simply take advantage of the holiday. "There's no excuse for Big Oil companies to ... profiteer, to price gouge or exploit families,” Pelosi said, adding that there was no guarantee to prevent companies from further price hikes.

In April, Democrats in the House and Senate unveiled proposals to target price gouging by energy companies. In it, they aimed to empower federal regulators to investigate price-setting practices by companies, like Shell and ExxonMobil, and open the door to fines or other punishments for potential abuses.

Without congressional buy-in, the administration is left with limited room to maneuver. Biden has maintained that the war in Ukraine is to blame for gas prices and he has both released oil supplies from U.S. strategic reserves and encouraged energy companies to up production with limited success.

Even if he were to get the federal gas tax holiday approved, it is unclear whether the holiday would meaningfully arrest prices. Former President Barack Obama had once dismissed the idea as little more than a PR gimmick, and economists have suggested that there is no guarantee it would prevent any further price hikes.

"It would be very unlikely that gas prices would fall by more than a dime because of this change," Harvard Kennedy School professor Jason Furman, who served as a top economic adviser to the Obama administration, told NPR. "And oil company profits would go up by billions of dollars."