Trump's Gas Tax Holiday Proposal Faces a Broken Funding System

President Trump has called for a temporary waiver of the federal gas tax, which currently costs drivers 18.4 cents per gallon. This proposal comes as gasoline prices have hit four-year highs, driven by the oil trade disruption caused by the war with Iran.

The national average price for a gallon of gasoline is now $4.46, up from around $3 prewar. While a gas tax holiday would require an act of Congress, several bills have been introduced, but it remains unclear whether the proposal will advance.

If enacted, waiving the tax would save drivers at most 18.4 cents per gallon, or $2.76 on a 15-gallon fill-up. However, analysts warn that some of the savings might not reach consumers.

The Penn Wharton Budget Model estimates that about 13.2 cents per gallon in savings would actually reach drivers, while the Tax Foundation estimates it at about 16 cents. Additionally, lower prices could increase demand for gasoline, potentially worsening the supply-demand imbalance that is driving prices up.

A gas tax holiday also means less money for road maintenance. Revenue from the federal gas tax goes into the Highway Trust Fund, which funds interstate construction and mass transit.

State gas taxes, which average 33.3 cents per gallon, are often used for local road repairs. For example, when Georgia paused its gas tax for two months, it cost the state about $361 million.

Poorly maintained roads lead to pothole-related damages, which cost drivers $26.5 billion in repairs in 2021, according to AAA.

Beyond the immediate proposal, the federal gas tax faces a fundamental problem: it hasn't collected enough money to fully fund highway construction for years. The tax was last raised in 1993, and since then, the cost of road repairs has risen, vehicles have become more fuel-efficient, and per capita miles driven have peaked.

For 2026, the shortfall is estimated to be $17 billion, requiring Congress to make up the gap with general taxpayer funds. As more drivers choose electric vehicles, which don't pay gas taxes, the system becomes even less sustainable.

Alternative solutions, such as vehicle weight fees, road-user charges based on miles driven, and congestion tolls, are being debated but have not yet gained traction as replacements for the federal fuel tax.