There are, however, three initiatives that the U.S. could take to temper gas prices and take some of the pressure off hard-pressed consumers: (1) encouraging an increase in domestic oil and gas production; (2) temporarily suspending federal and state gas taxes; and (3) providing means-tested tax credits/rebates to taxpayers.
(1) Oil and gas production companies will hardly require government incentives to rev up production. When the oil price tanked as the planet emerged from the Great Recession and Saudi Arabia substantially increased production in order to reduce competition from America’s exploding shale oil and gas fracking industry, drilling became unprofitable. Many U.S. drillers capped their wells. Now that oil prices are skyrocketing, uncapping those wells and resuming production is a no-brainer. Visions of windfall profits are about to be realized.
(2) Congress should move immediately to suspend the federal gas tax of 18.4 cents per gallon and 24.4 cents per gallon for diesel fuel. Federal gas taxes fund the Highway Trust Fund, which finances road construction and repairs. Since the recently enacted Infrastructure Investment and Jobs Act allocates much more money to highway and bridge building and maintenance than is in the Highway Trust Fund, the temporary suspension of the gas tax will hardly be felt at all.
The states should follow suit and also suspend their fuel taxes, which are often even higher than the federal levy, ranging from a low of 14.98 cents per gallon (Alaska) to 66.98 cents per gallon (California).
Doing the math, the price at the pump will be reduced by between 33 and 85 cents per gallon depending on the state.
(3) The U.S. has a long history of means-tested tax credits/rebates it has allowed either to encourage certain behaviors or to alleviate pocketbook pressure in a crisis. The most recent such initiatives were prompted by the Covid-19 pandemic’s impact on family finances. Instituting such a credit based on taxpayer miles traveled or gas expenditures would lessen the added expense burden caused by higher prices.
So that taxpayers should not have to wait until the next tax filing season, credits could be distributed quarterly based on a sampling of miles traveled/gas consumed, with adjustments for individual taxpayers based on their annual tax filings.
The combination of all three initiatives would insulate the U.S. somewhat from global energy vicissitudes while also easing inflation’s impact on family pocketbooks and the national economy.
March 11, 2022