The federal gas tax has never been suspended since it was created during the Great Depression in 1932, but that may soon change. With prices at the pump soaring 50% since the Iran war began at the end of March, the White House is thinking of more ways to provide energy relief to consumers. It would be on top of several other measures announced recently, like waiving the Jones Act and loaning crude from the U.S. Strategic Petroleum Reserve.

Snapshot: "Yeah, I'm going to reduce [the federal gas tax]," President Trump told reporters, saying it would be suspended "till it's appropriate." Any suspension would need to be approved by both chambers of Congress, where support is building for such a waiver. Several states have already added to the effort by implementing holidays of their own, like Indiana, Georgia, and Kentucky.

On the federal side, the gas tax primarily funds road construction and repairs across the nation through the Highway Trust Fund. It charges 18.4 cents per gallon of gas, or 24.4 cents per gallon on diesel, with a suspension set to cost the federal government roughly $115M per day, or about $3.5B per month. While that can help consumers in the immediate term, there have been questions about what it will mean for the federal deficit and solvency in the long run.

Outlook: Despite a span of decades, with some marked by high inflation, the federal gas tax has not increased since 1993. Even before the latest discussion, the Congressional Budget Office estimated that the Highway Trust Fund would run out of cash by 2028. Depending on how long the federal gas holiday is in effect, that date may move up to 2027, requiring new sources of revenue like a Mileage-Based User Fee or new spending authority to keep the fund solvent. (4 comments)