East Texas economist breaks down gas tax holiday proposal

“Any short-term gain is going to haunt us as long-term pain.”
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Published: Jun. 22, 2022 at 9:49 PM CDT
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TYLER, Texas (KLTV) - President Biden is calling on Congress to suspend the federal tax on gas and diesel for three months in an effort to curb high gas prices.

The gas tax holiday would mean that for 90 days, drivers would not pay the 18.4 cents a gallon tax on gas and 24.4 cents a gallon tax on diesel.

“All this is going to do is kick the can down a little bit and not very far,” UT Tyler professor of management Dr. Harold Doty said. “Any short-term gain is going to haunt us as long-term pain.”

“It could end up being more harm than good because right now we’re just beginning to see some positive effects from demand destruction,” Doty said.

According to the Associated Press, if the gas savings were fully passed along to consumers, people would roughly save 3.6% at the pump.

“It’s going to shift demand back up a little bit which will just cause more price pressure, and when they take the brakes off, we’ll be right back where we started from, at best,” Doty said.

Biden is also calling on states to suspend their own gas taxes or provide similar relief.

“The Biden administration is trying to do something, and I’m glad they’re trying to do something, but I think there are other activities they should be looking at that might address the fundamental problems,” Doty said.

“What we really have is a problem with our refining capacity and during the pandemic that was reduced in the United States. You cannot replace that capacity in 90 days, period.”

Congress would need to approved the federal tax break to see this enacted.

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