Rising gas prices and tax-holiday proposal put Biden, Democrats in a bind

Record-high inflation, geopolitical tensions abroad and warnings about the price of gasoline reaching $7 per gallon have Democrats in Washington scrambling to address costs directly hurting Americans’ pocketbooks.

One response from a small group of Senate Democrats would suspend the federal gas tax, currently at 18.4 cents per gallon. Democrats have begun taking a more public stance in acknowledging the need to combat inflation, which has reached a 40-year high in a midterm election year.

The idea has quickly become a political lightning rod on Capitol Hill.

Senate Republicans accuse Democrats of trying to provide cover for vulnerable lawmakers and say a gas tax holiday would leave a roughly $20 billion hole in the Highway Trust Fund, which pays for transportation infrastructure projects.

“Just to make the political games transparent, they want this to expire right after the midterms, as soon as the next Congress is sworn in,” Senate Minority Leader Mitch McConnell, Kentucky Republican, said in a floor speech. “Democrats want to blow a $20 billion hole in highway funding so they can try to mask the effects of their own liberal policies on working Americans.”

The Committee for a Responsible Federal Budget, which estimated the shortfall at $20 billion, warned that such a tax holiday could further raise inflation because of increased demand.

“I guess you could say ‘We’re going to do a holiday on all income taxes’ sure would be popular,” said Sen. Richard C. Shelby, Alabama Republican and chairman of the Appropriations Committee. “It sounds like political expediency more than substantive because it’s not going to change the spiraling inflation.”

With heightened fears of a Russian attack on Ukraine and supply chain woes, gas prices could soar as high as $6.50 or $7 per gallon, veteran oil analyst Dan Dicker said.

The geopolitical tensions have “added fuel to the fire on energy prices,” he told “Yahoo Finance Live,” but the underlying cause is a lack of investment in global oil production. The national average for a gallon of regular gasoline is $3.52, up nearly $1 per gallon from one year ago, according to AAA.

Politicians on both sides of the aisle have floated the idea of a gas tax holiday since at least 1996, when Republican presidential nominee Bob Dole proposed it. However, it has never come to pass.

The proposed Gas Prices Relief Act of 2022 is led by five Senate Democrats: Margaret Wood Hassan of New Hampshire, Jacky Rosen and Catherine Cortez Masto of Nevada, Debbie Stabenow of Michigan and Raphael G. Warnock of Georgia.

Mrs. Hassan, Ms. Cortez Masto and Mr. Warnock are up for reelection.

Mrs. Rosen said the tax break would offer much-needed relief from rising costs for families.

“What I keep hearing from everyone on the ground in Nevada is people are concerned about how they pay their bills,” she said. “They get some relief at the gas pump, they can spend that money in other ways.”

The proposal also is getting a verbal shellacking from some Democrats. 

Sen. Joe Manchin III, West Virginia Democrat and chairman of the Energy and Natural Resources Committee, called the tax holiday proposal “crazy.” President Biden has not endorsed the plan, but the White House has said “all options are on the table.”

Christopher Murphy, a Connecticut Democrat who partnered with Sen. Bob Corker, Tennessee Republican, to push for a gas tax increase in 2014, was undecided.

He placed part of the blame for a lack of solutions to combat inflation on Republicans, despite Democrats’ control of Congress and the White House.

“Republicans need to show us how they’re going to do something about the costs families are facing instead of just complaining about what Democrats are doing,” Mr. Murphy said.

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