What is the federal gas tax? And why does Trump want to suspend it?
President Donald Trump's idea to save drivers a few dollars at the pump could cost them in the long run.
While fueling up her car, WCCO asked Tyannah Huttner how she'd feel if the price of gas suddenly dropped by 18 cents.
"Any reduction is nice at this point. I'm just tired of seeing it going up and up and up," Huttner said.
We said 18 cents because that is essentially the current federal gas tax — 18.4 cents — applied to each gallon. For diesel drivers, it's 24.4 cents per gallon.
Mr. Trump wants to suspend the federal tax, which is instant savings for drivers.
The money goes into the Federal Highway Trust Fund, which helps pay for highway and mass transit projects across the country. In a year, it's estimated the tax will generate $41 billion for the fund.
Pausing the tax could lead to less spending on road projects or force lawmakers to find funding in other ways, according to tax policy expert Adam Hoffer.
"Your alternative to filling a budget hole in the transportation budget is a bunch of other unpopular taxes [like] income tax, sales taxes, property taxes," Hoffer said.
Road projects aside, we want to know how much drivers would save. Let's say a federal gas tax pause would drop prices exactly 18 cents a gallon. For a 15-gallon tank, that's $2.70 saved. When filled up weekly, that's about $10.80 a month.
Here's the issue: Experts say the price drop would be less than 18 cents.
"Some of that tax will end up staying with the gas station itself, maybe the producers, or anyone else in the supply side of the gas market," Hoffer said.
An analysis by the Penn Wharton Budget Model determined the actual savings for drivers would be about 13.2 cents per gallon. If the tax pause were to last from June through September, a driver filling up a 15-gallon tank weekly would save approximately $35 total.
Suspending the state gas tax might be more noticeable for drivers, something that's already happening in Georgia and Indiana. Minnesota's gas tax is 32.6 cents per gallon.
"We still need to remember that gas prices are up over a dollar than what they were a year before. So, even if we got rid of gas taxes all together temporarily, we're still going to have higher fuel prices today than we did a year ago," Hoffer said.
One more concern is the time of year. The summer travel season is upon us. That means people are driving more and gas prices tend to rise.
Hoffer said even if a gas tax pause lowers prices, demand could send them right back up to where they are in a matter of weeks.
Congress would need to approve pausing the federal gas tax. It denied President Biden's request to do so in 2022.