Gas tax holiday, commuter deduction: Congress’ fuel-price proposals

With gas and diesel prices still elevated amid supply disruptions tied to the war with Iran, lawmakers in Congress are rolling out proposals aimed at easing the sting for household budgets.

This month, House lawmakers introduced several bills that address the issue in different ways: by temporarily suspending federal gasoline and diesel taxes, restricting diesel exports or allowing workers to deduct thousands of dollars in commuting expenses from their taxable income.

The new proposals come as affordability remains a major issue ahead of the Nov. 3 midterm elections. Nearly half of registered voters surveyed — 47% — said the cost of living would be the single most important factor in deciding their vote, according to a Reuters/Ipsos poll of 1,167 adults conducted in late August.

Gasoline and diesel prices have surged in recent months amid higher crude oil prices and disruptions to global refining and fuel supplies as both the conflict in the Middle East and the Russia-Ukraine war continue.

As of Tuesday, the average national price for a gallon of regular unleaded gasoline is about $4.48, according to AAA. That’s up from $4.10 a month ago and $3.18 a year ago. Diesel prices also have surged, reaching a per-gallon national average of about $6.53 on Tuesday — up from about $5.59 a month ago and $3.69 a year ago.

On Monday, a bipartisan bill was introduced that would create a tax deduction for commuting expenses worth up to $4,080 annually, or $340 a month, according to a release issued by Rep. Laura Gillen, D-N.Y., who sponsored the measure with Reps. Jeff Van Drew and Tom Kean Jr., both Republicans from New Jersey.

Called the Lowering Commuting Costs Act, the bill would establish a tax deduction for commuting expenses related to gas, public transit and tolls. The deduction would be “above the line,” meaning it’s available to all taxpayers, not just those who itemize their deductions.

“If businesses can deduct the cost of doing business, working people should be able to deduct what it takes to get to and from their jobs,” Van Drew said in the release.

However, the proposal has limitations, said Garrett Watson, vice president of federal tax policy for the Tax Foundation, a research organization.

“Taxpayers would only receive tax relief during tax season, which doesn’t help in the short-term,” Watson said. “Lower-income taxpayers may see little to no benefit as they must have taxable income to offset to get a benefit from the deduction.”

Meanwhile, last week, Rep. Andy Harris, R-Md., introduced a bill that would temporarily suspend the federal excise tax on gasoline and diesel through Dec. 31.

Those levies are 18.4 cents per gallon for gas and 24.4 cents per gallon for diesel, according to the U.S. Energy Information Administration. Those federal taxes largely fund highway and public-transit projects.

The measure echoes similar proposals floated in the spring, not long after the Iran war started.

The typical passenger car gas tank holds 12 to 16 gallons, while larger SUVs and trucks often have larger tanks, according to Edmunds, a car research website.

If the taxes were suspended, the savings on gas purchases would amount to $2.76 per 15-gallon fill-up. For diesel, savings would be $3.66 per 15 gallons.

Watson said it’s uncertain whether all of that savings would reach consumers. “If demand reacts to the suspension, that could result in higher pre-tax prices that would benefit producers,” he said.

Rep. Tim Burchett, R-Tenn., introduced two bills last week that would restrict U.S. diesel exports as a way to bring prices down.

One of the bills would prohibit exports through January 2027. The other would trigger an export ban when the national average diesel price reaches $5 a gallon and allow exports to resume after that average remains at or below $4.50 for 30 consecutive days.

The idea is that keeping more domestically produced diesel in the U.S. could increase supply and reduce prices. However, energy analysts say such a move could have unintended consequences in the global markets.

“An export ban could temporarily depress Gulf Coast diesel prices. But there’s no guarantee that relief reaches the regions with the highest prices, and over time it could cut refinery runs and tighten supplies of other fuels, gasoline included,” said Patrick De Haan, head of petroleum analysis for GasBuddy, in an X post on Monday.

It’s uncertain whether Congress could consider any of these bills when lawmakers return after the mid-term elections.