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President Biden considers gas tax holiday amid surging fuel costs

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Yahoo Finance's Rick Newman explains what the federal gas tax is and what the political implications of suspending it are.

Video Transcript

- Guys, shifting gears here to the rising cost of gas and pain at the pump. How that continues for consumers. President Biden is considering a gas holiday in an effort to reduce the price per gallon. The President was asked about this over the weekend. Take a listen.

- Mr. President, are you considering a pause on the federal gas tax? Mr. President, we know that you're considering it. And Secretary Yellen spoke about it yesterday.

PRESIDENT BIDEN: Yes, I'm considering it.

- How soon can we expect the decision?

PRESIDENT BIDEN: Well, I hope I have a decision based on data I'm looking for by the end of the week.

- Now, let's bring in Yahoo Finance's own Rick Newman. Unconfirmed whether or not Rick was swimming in the background there. But we know you're close to what the President says very often, Rick. What did you make of what the President had to say on the Beach?

RICK NEWMAN: I've been to that beach many times, as a matter of fact. It's a lovely spot. So Biden clearly is trying to do something to help out motorists a little bit, and also perhaps win back a few political points he has lost as gas prices have hit $5 and gone a little bit above it. So there's been this idea circulating for a little while that the government could suspend the federal gas tax.

Now, Biden says he's considering this. What he means is he's considering whether to support the idea because he can't do it alone. Since it's a tax, Congress would actually have to pass a law that would suspend the tax for some period of time. And a lot of policy analysts don't love this idea. That federal gas tax, it's 18.4 cents per gallon.

That is used to finance the Highway Trust Fund. The Highway Trust Fund is already woefully short of money. So you would be interrupting the main source of money for the fund that we use to fix highways and bridges and all those things. So this would be deficit financed.

And then another thing Biden said he might consider is some kind of rebate card you could send out to consumers to sort of compensate them for the extra money they're paying for gas. That's also problematic, because if you basically subsidize gasoline purchases, you're actually increasing demand for gasoline. And of course, that might push the price higher rather than lower.

So Biden does not have a lot of-- he really doesn't have any good choices here. But he's trying to show that he will do whatever he might be able to do.

JULIE HYMAN: Well, and true to politics, does he still get the benefit of saying he'd like to do it even if it doesn't happen?

RICK NEWMAN: I don't think so. I think that Biden and his fellow Democrats in Congress have a huge credibility problem with voters because they have just not been able to do many of the things they said they wanted to do. And voters, without knowing the intricacies of how Congress works, voters do know that Democrats have majorities in both Houses of Congress. So why haven't the Democrats been able to get Build Back Better done? Where are the green energy tax credits, the social welfare expansions?

They're nowhere. They're not done. And I have to scratch my head a little bit and think, let's say Biden really did get behind this idea of suspending the gas tax. I don't think he could get all Democrats to vote for it, because you have some progressives who don't at all want to subsidize fossil fuels. They want to subsidize green energy. And they might not go for this.

So would there be enough Republicans to vote for this? Eh, Republicans hate taxes in theory. So maybe some Republicans would vote for this. But they would also be reluctant to give Biden something that looks like a win. So this could be yet another thing.

And there are a bunch of other issues like this that Biden says he's thinking about, he's considering. He just hasn't pulled the trigger yet.