President Donald Trump has suggested the possibility of suspending the federal gas tax as a move to alleviate rising fuel costs. On Tuesday, Trump indicated his administration is exploring this option to reduce gas and diesel prices ahead of the November midterms.
The national average gas price is nearly 50% higher than before the conflict in Iran. This increase has intensified pressure on the administration to mitigate the economic impact on consumers. Earlier, Trump signed an executive order permitting the use of tax-free dyed diesel for road use until year-end, with no interest or penalties.
When questioned about suspending the federal gas tax, Trump stated, “We’re thinking about that.” He has previously supported this idea but did not disclose a timeline. Republican leaders like Senator John Thune and Representative Jason Smith have expressed willingness to consider measures that ease economic burdens.
Current Gas Prices
As reported by the American Automobile Association (AAA) on Tuesday, the national average gas price has reached $4.37 per gallon, up from $3.12 per gallon a year prior. California drivers face the highest prices at $6.36 per gallon. Other states including Hawaii, Washington, Nevada, Oregon, and Alaska also have significant prices, while Indiana, Ohio, and Georgia see the lowest prices.
Diesel prices have also surged, with a national average of $6.30 per gallon. States like California witness diesel prices at $8.35 per gallon. Other states with high diesel prices include Washington and Hawaii. Conversely, Texas, Georgia, and Oklahoma enjoy the lowest diesel prices.
Potential Savings for Americans
The federal tax stands at 18.4 cents per gallon for gas and 24.4 cents per gallon for diesel. A suspension would typically reduce the price of regular gas by 4% and diesel by slightly less.
If the federal gas tax were removed, savings could range from $1.84 to $3.68 on fill-ups from 10 to 20 gallons. Over a year, drivers using 500 to 1,000 gallons could save between $92 and $184.
Analysts from the Bipartisan Policy Center suggest not all savings would reach consumers. They predict price reductions of 10 to 16 cents per gallon, resulting in a 2.3% to 3.7% decrease for gas and 1.5% to 2.5% for diesel.
Economic Impact
A federal gas tax suspension could lead to billions in revenue losses for government agencies that rely on these funds for infrastructure projects. The Congressional Budget Office estimates annual revenues from these taxes at $41 billion, used for highway and transit maintenance.
The Bipartisan Policy Center estimates a five-month suspension could cut fiscal year 2026 revenues by approximately $17 billion.
State Actions
Some states have already taken steps to suspend or reduce gas taxes. States like Georgia suspended their gas tax earlier in the year. Recently, Ohio initiated a 90-day suspension of its gas and diesel taxes.
Other states, including Kentucky and Illinois, have made temporary adjustments. However, a federal tax suspension requires Congressional approval, where bipartisan support remains uncertain.