A Federal Fuel Tax Holiday Would Cost $3.5 Billion a Month

Suspending the federal gas and diesel taxes would drain roughly $3.5 billion a month from the Highway Trust Fund, according to the American Trucking Associations — and buy drivers about 18 cents a gallon at the pump. That trade, in the expert consensus, is a bad one for trucking.

The idea had a moment on the campaign trail. With fuel prices at a record high for an Election Day, several congressional candidates pitched a federal fuel tax holiday as an affordability fix. Randy Villegas, who won California's 22nd District seat on Nov. 4 against incumbent Rep. David Valadao (R-Calif.), called for a temporary suspension in October. Scott Colom, the Democrat challenging Sen. Cindy Hyde-Smith (R-Miss.), backed the same idea; his race remained too close to call on Nov. 6. Rep. Ashley Hinson (R-Iowa), who ran to replace Sen. Joni Ernst, also supported a suspension — and lost. President Donald Trump has entertained the concept, but he'd need Congress to sign off.

That's not a small caveat. Congress has never suspended the federal gas tax, and it's unclear whether the lame-duck session starting Nov. 9 or the next Congress has the appetite. The federal rates — 18.4 cents per gallon on gasoline and 24.4 cents on diesel — haven't moved since 1993.

What does a holiday actually change for carriers?

Not much, and less than it appears. Darrin Roth, ATA's vice president of highway policy, laid out the arithmetic and the consequences.

"We already have a pretty high debt that unless they found offsets, that would come out of the national debt or, if they don't replace the revenue, there are significant implications for surface transportation projects all over the country and massive problems for the states," Roth said. "If there was a holiday, they'd likely replace that revenue, but we can't necessarily count on it, particularly if it goes on for a long time."

For trucking, the costs come back disguised as maintenance. Potholes chew up tires and suspension systems. Closed bridges force detours, and detours mean miles — the industry's least favorite expense. A holiday could also accelerate the Highway Trust Fund's slide toward insolvency, with its balance approaching $0 by fiscal year 2028.

Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University, put it more colorfully. The holiday, he said, would be like "putting a Band-Aid on a bleeding artery."

"It will stanch the flow for a second or two, but the real problem is you need a different kind of surgery to stanch that flow," Dhawan said.

Why diesel stays expensive regardless

Dhawan's diagnosis shifts the frame from Washington to the water. Diesel's price is set globally, and the global market is short — not the U.S. one.

"The only long-term solution is to have more supply of gasoline and diesel, and right now for the trucking companies the biggest problem is the diesel is in short supply — not because we don't have the diesel here. We have plenty of diesel," he said. "But the price of the diesel, the market for diesel is global, and there is a huge shortage of diesel in the global market, and that affects the price over here."

In his view, prices stay elevated until the Strait of Hormuz reopens fully and Ukraine's strikes on Russian refineries stop. Russia, he noted, is the biggest diesel supplier to Asia and Africa, and its export capacity is impaired — a shortage that ripples into American pump prices.

The states are already running the experiment

Georgia, Indiana and Ohio have already suspended their own fuel taxes, and state rates make the federal levy look modest. Ohio charges 38 cents per gallon on gasoline and 47 cents on diesel; Georgia 34 and 38 cents; Indiana 63 and 64 cents. Georgia's suspension alone may cost the state $200 million a month.

"That may turn out to be a little bit of a break to the consumers and the companies but again, the side effect would be that the states don't have enough money to do the repairs on the state highways trucking companies use, so there's always a cost," Dhawan said.

There's always a cost. For carriers weighing a few cents per gallon against deteriorating roads and a trust fund headed for zero by 2028, the cheaper option may simply be keeping the tax.