The higher the price of crude oil, the less a tax break will help gasoline prices.
With gasoline prices in the US breaching $5 per gallon for the first time, president Joe Biden on June 22 asked Congress to suspend federal gasoline taxes for three months. The suspension is one of the few options open to the federal government to lower the cost of gas, short of begging Saudi Arabia to drill more, since US production is already close to maxed-out.
The trouble is: The tax holiday won’t save drivers much. The federal gas tax is 18.4 cents per gallon, less than 4% of the current gasoline price. The tax is fixed, so as the price of crude oil rises, the tax accounts for a proportionately smaller share of the total retail gasoline price. The more expensive gas gets, in other words, the less a tax break matters.
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