President Donald Trump is pressing Congress to suspend the federal gasoline tax as American households contend with pump prices hovering near $4.50 a gallon nearly three months into the war with Iran. The president acknowledged the 18.4-cent-per-gallon levy accounts for only a small fraction of what drivers pay, but told reporters Monday that suspending it would still deliver relief. “It’s still money,” Trump said.
Lawmakers on both sides of the aisle have already been pushing for a suspension, with some legislation in Congress proposing a halt through October 1. Proponents argue the tax cut would provide much-needed relief for families and businesses straining under elevated energy costs since the United States and Israel launched the war nearly three months ago, upending global oil flows and sending fuel prices soaring.
But analysts caution that drivers should not expect an immediate 18-cent price drop at the pump. The federal gas tax is collected at the wholesale level, not at the retail pump, meaning any savings must be passed down through suppliers before reaching consumers. “You can’t suspend the tax and then expect everyone to wake up the next morning and gas is suddenly 18 cents cheaper,” said Carl Davis, research director at the Institute on Taxation and Economic Policy, a nonprofit think tank. “It doesn’t work that way.”
Davis noted that state-level gas tax holidays have often produced limited relief that takes time to trickle down — if it reaches drivers at all. Suppliers may also retain part of the savings to pad profit margins. The Penn Wharton Budget Model at the University of Pennsylvania estimates that roughly 72% of a federal gas tax cut would actually reach consumers, amounting to about 13.2 cents of the full 18.4-cent rate.
Even with that pass-through, the savings for average drivers are modest. If the federal gas tax is suspended from June 1 through October 1, a household filling up a 15-gallon tank once a week would save roughly $35 over those four months, according to the Penn Wharton model. With the national average gas price at about $4.50 a gallon Monday, per motor club AAA — up sharply from $2.98 in late February before the war began — Davis said it might be hard for many drivers “to even notice” a tax cut if it reaches them.
The larger concern centers on government revenue. The federal gas tax is the single biggest source of funding for the Highway Trust Fund, which finances road, bridge, and public transit projects across the country. At current fuel price and demand levels, a four-month suspension would cost the government an estimated $8.35 billion in lost revenue, the Penn Wharton Budget Model confirmed to the Associated Press. If the 24.4-cent-per-gallon federal diesel tax is also paused, that figure climbs closer to $11.5 billion.
Legislation in Washington proposes offsetting any lost Highway Trust Fund revenue with general funds, but critics warn that approach could increase the federal deficit and potentially jeopardize the long-term sustainability of infrastructure projects. The gas tax rate has remained unchanged since 1993, which experts say has already eroded the fund’s purchasing power when accounting for inflation. “You could very easily imagine some kind of combination of higher national debt and lower funding for roads and bridges and other transportation projects,” Davis said. “Eventually there will be a consequence.”
Several states have already moved to ease the burden on drivers through their own gas tax policies. Indiana and Georgia have recently implemented temporary suspensions of their state-level gas taxes, while Kentucky and Utah have reduced their levies. Other states are weighing similar options. But unlike the federal government, states typically must balance their budgets every year, and some rely on fuel tax revenues to fund education, environmental initiatives, and other public programs beyond transportation infrastructure.
The underlying driver of high pump prices remains the cost of crude oil, which accounts for the largest share of what consumers pay at the pump. Despite efforts by governments worldwide to boost supply during the war — including the tapping of emergency oil stockpiles — steep prices persist. Both Brent crude, the international benchmark, and U.S. crude are now trading above $100 a barrel, up from roughly $70 just months ago.
All eyes remain on the Strait of Hormuz, the narrow waterway through which a fifth of the world’s oil once passed. Tehran and Washington remain in a standoff over the strait, with broader ceasefire talks continuing to stall. Analysts have repeatedly warned that if the war drags on and supply chains remain disrupted, prices for gasoline and a range of other goods could continue to climb.
“This is really a foreign policy problem,” Davis said. “There’s not a fiscal policy band-aid that can be slapped on.”