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Economist says Biden's gas tax holiday could boost local economy

President Biden today called on Congress to temporarily suspend the federal gas tax and for states to follow suit. But how much local support will this proposal receive? KPBS reporter Kitty Alvarado has reaction from local representatives.

President Joe Biden called on Congress Wednesday to suspend the federal gas tax for 90 days. He also called on oil companies to lower prices, saying "Your customers, the American people, they need relief now," he said.

Biden also wants states to suspend their gas taxes — something many Californians have been asking Gov. Gavin Newsom to do for months.

Newsom did propose suspending a scheduled July 1 increase in the state gas tax, but lawmakers were cool to the idea. In his May budget revise, Newsom called for a $400-per-vehicle rebate, but the state legislature instead passed a $200-per-person rebate in its budget, which has not yet been signed by the governor.


State Senator Brian Dahle, R-Redding, who is running against Newsom for governor, still wants to see a suspension of the gas tax.

"This would reduce not only just the cost per gallon that goes in your car, but also the cost of your food," he told KPBS. "Everything that is grown in California is moved by trucks and diesel tractors that farm, and it is all driving the cost of living up. So, it’s a twofold opportunity if you reduce the tax."

Republicans in the legislature called for a suspension of the tax a year ago. Dahle said, "You would’ve saved over — this year — approximately $2,500 so far. That (is what) your family would have saved if we would have reduced the gas tax a year ago."

In a written statement, a spokesperson for the governor said, "Governor Newsom agrees Californians need relief for the rising costs of everyday expenses like gas. That’s why he’s advocating for immediate, direct payments to California families that are feeling the weight of inflation on everything from gas to groceries."

KPBS reached out to members of San Diego's congressional delegation for reactions to Biden's call for a gas tax holiday, and received written statements from three lawmakers.


Rep. Juan Vargas, D-51, said he is for the gas tax holiday and "all initiatives that would bring gas prices down."

Rep. Mike Levin, D-49, also supports the proposal, but said more must be done to keep prices down, saying, “I have some concerns about ensuring Americans see the full benefit of it, because Big Oil will still be able to raise prices or keep them artificially high. That's why the Senate must also act on House-passed legislation to crack down on price gouging by Big Oil.”

Rep. Darrell Issa, R-50, said Biden's call for a suspension is a "gas tax gimmick" that "doesn’t even begin to make up for the pain at the pump he has delivered to every driver, and he owes the country not only an apology, but substantially more reform and repair ... for what he broke.”

University of San Diego economist Alan Gin said suspending the state and federal gas taxes will help and add up to savings of about $0.70 a gallon. He said just pausing the federal tax of $0.18 a gallon will give the local economy a big boost.

"My estimate is that for every one cent that the price of gallon gasoline goes down, that would add $1 million a month to the local economy. So, if this entire $0.18 could be passed, that would be another $18 million a month to the local economy."

But he said there is a risk that the full savings won’t be passed on to the consumers. In that sense, Gin said a rebate check from the state would be better. "If you cut the tax, the gas stations have to pay less of the tax to the government, but they’re not forced to give it all back to consumers," he said. "So that’s where the rebate comes into play. It would give back all the money to consumers in that case."

Any relief plan, state or federal, has to be approved by lawmakers.