Suspension of the Federal Gas Tax: In Brief

Contents

• Introduction
• The Federal Gas Tax
• Composition of Fuel Prices
• Highway Trust Fund Insolvency
• Potential Suspension of the Federal Gas Tax
• Considerations for Congress
• Possible Effect on Prices at the Pump
• Possible Effects on the Highway Trust Fund
• Possible Effects on the LUST Trust Fund

Introduction

U.S. and Israeli military operations against Iran since February 2026 and subsequent Iranian military actions throughout the Persian Gulf have disrupted global commercial markets.¹ Oil is among the commodities affected.² In May 2026, the average price of a gallon of gasoline for U.S. consumers has increased more than $1.50 compared with the price in February 2026.³ President Trump and multiple Members of Congress have proposed suspending the federal excise tax on gasoline (federal gas tax) as a way to partially offset this price increase.⁴

The federal gas tax is the primary source of revenue for the federal Highway Trust Fund. Congress established the federal gas tax rate in statute. While some Members of Congress have previously proposed suspending the federal gas tax, no such law has ever been enacted. This report provides information about the federal gas tax and the Highway Trust Fund. It also discusses considerations related to a potential suspension of the federal gas tax.

In the past, some Members of Congress have proposed suspending the federal diesel tax as well as the federal gas tax. This report focuses solely on suspension of the federal gas tax.

The Federal Gas Tax

The federal gas tax is one of several federal transportation-related excise taxes that provide revenue for the Highway Trust Fund (see "Highway Trust Fund Insolvency," below). Other such federal taxes include the diesel fuel tax, alternative fuel taxes, taxes on certain heavy truck and trailer sales, taxes on heavy truck tires, and a weight-based annual heavy vehicle use tax, as reflected in Table 1. Between FY2015 and FY2024, the most recent 10-year period for which data are available, fuel taxes accounted for 82% of Highway Trust Fund revenue. The federal gas tax alone accounted for 58%.⁵

The rates for the taxes that provide revenue for the Highway Trust Fund are set by law. Congress last raised the federal gas tax in 1993, when it set the rate at 18.4 cents per gallon.⁶ Of this amount, 0.1 cent is directed to the Leaking Underground Storage Tank Trust Fund, often referred to as the LUST Trust Fund.⁷ The remaining 18.3 cents are directed to the Highway Trust Fund.⁸ The Highway Trust Fund has two accounts, the highway account and the mass transit account. The highway account receives an allocation equivalent to 15.44 cents per gallon of the gasoline tax, and the mass transit account receives 2.86 cents per gallon.

The federal gas tax is not collected at the point of sale to the consumer (i.e., at the pump) as a retail sales tax might be. Instead, the federal government collects revenue from roughly 850 registered suppliers, distributers, refiners, and blenders of fuel.⁹ This simplifies tax administration, as the Internal Revenue Service (IRS) has to monitor compliance of these entities, a smaller number when compared with the number of gas stations across the country.¹⁰ Some economists assert that all or nearly all of the federal excise taxes levied on motor fuels are passed on to the final consumer in the form of higher prices.¹¹

Composition of Fuel Prices

The U.S Energy Information Administration (EIA) makes periodic estimates of the components of the retail price of gasoline. In January 2026, 51% of the retail price of regular gasoline was attributable to the price of crude oil, 20% to refining, and 11% to distribution and marketing. Federal, state, and local taxes comprised 18% of the total average price.¹² These January data do not reflect price increases related to the Iran conflict. When retail prices are higher, the price of crude oil and refining tend to comprise a higher share of the retail price, whereas marketing and taxes form lower shares. For example, in May 2022 (when gas prices averaged $4.44 per gallon), 59% was attributable to crude oil, 26% to refining, 5% to distribution and marketing, and 11% to taxes. The share of the retail price attributable to taxes varies across the country, as state and local gas tax rates vary. Total state taxes added 51.7 cents to the price of a gallon of gasoline, on average, compared with the federal excise tax of 18.4 cents.¹³ At current price levels, the federal tax comprises about 4% of the retail price, on average.

Highway Trust Fund Insolvency

The Highway Trust Fund is a federal accounting mechanism that provides a dedicated source of funding for certain federal surface transportation programs.¹⁴ Congress established the Highway Trust Fund in 1956 to support construction of the Interstate Highway System and certain other roads.¹⁵ Today, Highway Trust Fund dollars are used to meet obligations authorized under surface transportation reauthorization legislation,¹⁶ such as the provisions contained in the Infrastructure Investment and Jobs Act (IIJA; P.L. 117-58) enacted in 2021.¹⁷

The Highway Trust Fund has two accounts: the highway account and the mass transit account.¹⁸ The majority of funds flow through the highway account. The highway account provides funding primarily for the federal-aid highway program and highway and vehicle safety programs, as well as for highway research.¹⁹ Congress established the mass transit account as part of the Surface Transportation Assistance Act of 1982 (P.L. 97-424, §531). The mass transit account provides funding for "making capital or capital related expenditures" on public transportation projects.²⁰ Because the highway account and the mass transit account fund separate programs with separate spending levels, the balance of one account may deplete more quickly than the other.

For many years, Highway Trust Fund revenue exceeded or was roughly equal to expenditures.²¹ Expenditures first exceeded revenue in FY2001 and have exceeded revenue since FY2008 consistently. The Congressional Budget Office (CBO) projects that if current revenue and expenditure trends continue, the balance in the mass transit account will approach zero in FY2027 and that the balance in the highway account will approach zero in FY2028.²²

The Highway Trust Fund cannot incur a negative balance. As the account balances approach zero, the Federal Highway Administration (FHWA) and Federal Transit Administration may slow reimbursements to states and local governments for the federal portion of transportation project costs.²³ FHWA could also reduce annual highway apportionments to the states.²⁴

Potential Suspension of the Federal Gas Tax

The federal gas tax has not been suspended since the establishment of the Highway Trust Fund in 1956. Some Members of Congress have proposed such suspensions, which are sometimes referred to as "gas tax holidays." Members of Congress have previously proposed temporarily suspending the federal gas tax in response to various factors, such as rising gas prices, economic conditions, or world events. For example, multiple Members of Congress proposed suspending the federal gas tax in response to the COVID-19 pandemic and inflation in FY2021 and FY2022.²⁵ In FY2008 and FY2009, during the "Great Recession," multiple Members introduced similar legislation to suspend the federal gas tax.²⁶ Proposals have included suspending the federal gas tax for a set period, as well as those that would suspend or reduce the federal gas tax whenever gas prices exceed a certain level.²⁷

Considerations for Congress

During the 119^th Congress, multiple Members have introduced bills to suspend the federal gas tax, including H.R. 3768; H.R. 7919; H.R. 8572; S. 4032; and S. 4485. As Congress deliberates suspending the federal gas tax, considerations may include the possible effects on gas prices, the Highway Trust Fund, and the LUST Fund.

Possible Effect on Prices at the Pump

The current price of gasoline is at a level above that of early February 2026. Reducing the price of gas by 18.4 cents per gallon by suspending the federal gas tax and passing this amount through to consumers could provide some price relief. However, even with an 18.4-cent reduction, gas prices would still have risen more than $1.30 per gallon between February 23 and May 11, 2026.²⁸

Suspending the federal gas tax may not reduce consumer prices by exactly 18.4 cents per gallon. Gasoline suppliers, distributers, refiners, and blenders could choose to reduce prices by more or less than 18.4 cents per gallon or, in theory, not reduce prices at all. Some Members of Congress have introduced legislation to address alleged "price gouging" in the context of gasoline prices.²⁹

In the 119^th Congress, H.R. 3768, H.R. 7919, H.R. 8572, and S. 4032 express the policy of Congress that "consumers immediately receive the benefit of the reduction in taxes" and that suppliers "take such actions as necessary to reduce [prices] to reflect such reduction." These bills encourage the Secretary of the Treasury to "use all applicable authorities to ensure the benefit of the reduction in taxes ... is received by consumers." Such a provision may be difficult for the federal government to enforce, as it may require estimating what the price of gasoline in each locality would have been in the absence of a federal gasoline tax suspension. Over an extended period, other factors, such as changes in the price of crude oil and other inputs, would likely affect the hypothetical price of gasoline without a federal gasoline tax suspension, potentially complicating implementation.

Although the federal government has never suspended its federal gas tax, states have suspended their state gas taxes. Economic studies of these state gas tax suspensions found that less than the full amount of the suspended tax typically is passed on to consumers in lower prices. For example, one widely cited economic study of cross-state price variation following a state gas tax suspension found that about 70% of the savings was passed on to consumers through lower prices.³⁰ Subsequent studies of other state gas tax suspensions generally also have found that tax savings were not fully passed on to consumers through lower prices.³¹

Possible Effects on the Highway Trust Fund

Suspension of the federal gas tax would reduce the revenue provided to the Highway Trust Fund. The Bipartisan Policy Center calculated that suspending the federal gas tax from May 2026 through September 2026 would reduce revenue by $17 billion.³² Some proposals in prior Congresses would not have compensated the Highway Trust Fund for revenue lost during a given suspension. Several bills in the 119^th Congress would compensate the Highway Trust Fund for this lost revenue, such as by transferring funds from the Treasury's General Fund (general fund). For example, H.R. 3768, H.R. 7919, H.R. 8572, S. 4032, and S. 4485 would require transfers from the general fund of "an amount equal to the reduction in revenues" for the Highway Trust Fund and the LUST Fund. With a general fund transfer, this reduction in revenue would not affect the health of the Highway Trust Fund, but it would increase the budget deficit.

If the reduction in revenue were not coupled with a general fund transfer, the balances in the highway account and the mass transit account would likely approach insolvency months sooner than CBO has predicted. As the account balances approach zero, state and local governments may receive slower reimbursements for work on federally funded highway and public transportation projects. State and local governments also may receive less federal funding through the highway formula programs at the beginning of the fiscal year. This could delay planned highway projects or lead to fewer highway projects overall.

In the past, Congress has prevented Highway Trust Fund insolvency through general fund transfers, raising the possibility of a general fund transfer subsequent to a federal gas tax suspension that could include the amount of money not collected during a federal gas tax suspension.³³ For a discussion of other options for preventing Highway Trust Fund insolvency, see CRS Report R48472, The Highway Trust Fund's Highway Account, by Ali E. Lohman, and CRS Report R47573, Funding and Financing Highways and Public Transportation Under the Infrastructure Investment and Jobs Act (IIJA), by William J. Mallett.

Possible Effects on the LUST Trust Fund

In 1986, in the Superfund Amendments and Reauthorization Act (P.L. 99-499), Congress established the LUST Trust Fund to help the U.S. Environmental Protection Agency (EPA) and states cover costs of responding to leaking underground petroleum storage tanks in cases where the owner or operator does not clean up a site, among other prevention and detection activities. In the United States, these leaking tanks have been a leading source of groundwater contamination and a threat to public drinking water. The federal gas tax is the primary source of monies for the LUST Trust Fund, and EPA typically has allocated approximately 90% of the annual trust fund appropriation to states to perform cleanups, conduct inspections, and carry out other activities to prevent petroleum releases into the environment.³⁴ If the LUST Trust Fund were to not receive funding from the federal gas tax or be compensated with transfers from the general fund, the fund would receive little or no new funds, and the remaining balance would be depleted over time. EPA would be required to rely on annual appropriations for LUST activities, and states would have limited access to federal funding to conduct petroleum tank cleanups and other activities to protect groundwater.³⁵

Senior Research Librarians Lena A. Maman and Lynn J. Cunningham conducted research for this report. Analyst in Public Finance Anthony Cilluffo and Specialist in Environmental Policy Angela Jones contributed language to this report.

Footnotes