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Suspending the Federal Gas Tax Won’t Help, Says IU Economist

INDIANAPOLIS – President Joe Biden called on congress to suspend the federal gas tax Wednesday, but an economist at Indiana University says drivers may hardly notice a difference.

Biden says he wants to suspend the gas of 18 cents per gallon of regular gasoline and 24 cents per gallon of diesel for three months. “It’s really not a great policy,” said Kyle Anderson, an associate professor of business economics at the Indiana University Kelley School of Business, in an interview with WISH-TV. “It likely won’t lead to much reduction in the price of gasoline.”

With refineries already working at full capacity along with a high demand for gas, prices probably won’t change, says Anderson. He told WISH-TV that suspending the tax won’t increase production or reduce demand which are two contributing factors in lowering gas prices.

However, Anderson says drivers might notice a difference if the state’s gas tax was suspended. “We might see prices go down by say, 20 or 30 cents per gallon, which is significant, would help somewhat, but the trade off with that is the state would lose a lot of tax revenue that would probably have to make up in some other area,” Anderson said.

Indiana’s gas tax is set to increase by 5 cents in July.

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