Americans could soon pay more at the pump as the U.S.-Iran conflict disrupts oil markets, while lawmakers debate suspending the federal gas tax, a move Canada has just taken.
Similar plans have been discussed in the U.S., but have yet to advance. In early March, Democrats in both the U.S. House and Senate proposed suspending the 18.4 cents-per-gallon federal gas tax through Oct. 1. Some states have also proposed suspending their state-level gas taxes. Canada’s federal gas tax is about 28 cents a gallon.
Carney’s announcement on Tuesday came after marathon talks between the U.S. and Iran failed to make progress on Monday, even after the two sides agreed to a tentative two-week ceasefire. The conflict has brought ship traffic through the Strait of Hormuz to a standstill, disrupting global oil markets and sending prices up.
Carney said the government is temporarily suspending the federal Fuel Excise Tax on gasoline and diesel across Canada, effective April 20. The move is expected to save Canadian motorists money at the pump, but will cost the government about $2.4 billion in revenue (about $1.74 billion in U.S. dollars). The government is also temporarily suspending the federal Fuel Excise Tax on aviation fuels.
“We’re cutting your taxes, reducing the costs of your homes, and providing you relief at the pump,” Carney said in a statement.
The Committee for a Responsible Federal Budget, a U.S.-based think tank, found suspending the U.S. federal gas tax would cost about $3.5 billion a month and speed up the insolvency of the Highway Trust Fund. Federal gas tax revenue goes into the Highway Trust Fund to pay for the interstate highway system and other infrastructure.
The group said suspending the U.S. tax would only marginally help consumers while adding to the federal government’s growing debt.
