ORLANDO, Fla. – Earlier this week, President Donald Trump told CBS News he has a goal of suspending the federal gas tax “for a period of time.” Trump’s comments come as gas prices have surged since the U.S. and Israel entered a war against Iran on Feb. 28, 2026.
At the end of February, the average cost of a gallon of gas in the U.S. was a hair over $2.98. By May 12, the national average had climbed to more than $4.50 per gallon.
Data calculated by Brown University’s Iran War Energy Cost Tracker estimates Americans have paid more than $20 billion in extra costs for gasoline since the start of the war. An increase in the price for a gallon of diesel fuel over that same time period adds another $17 billion in consumer costs.
President Trump’s logic is simple: suspend the federal tax on gasoline and diesel, and Americans will save money. But when it comes to simple math and gas prices, logic is far from logical.
The “pass-through” Problem
A federal gas tax cut does not guarantee an equal cut at the pump.
Let’s start with that simple math (and for simplicity, in most cases, we’ll round up or down to the nearest cent).
On May 12, 2026, the average price for a gallon of gas across the country is $4.50. By suspending the federal gas tax (set at 18.4 cents for a gallon of gas and 24.4 cents for a gallon of diesel), Americans would, on average, pay about $4.32 a gallon for gas.
Simple, easy math, right? But as we dig deeper, we’ll see how that 18- or 24-cent savings can quickly shrink – or disappear altogether.
We’ll also explore why this idea is the embodiment of robbing Peter to pay Paul.
Unlike state fuel taxes, federal fuel taxes are not collected at the pump. Instead, those taxes are usually built into the price of fuel much earlier in the supply chain – typically, when fuel leaves what’s known as a terminal rack, or fuel distribution terminal.
Here’s the simplified version of the process:
- Crude oil is extracted from the ground
- sent to a refinery
- refined into gasoline, diesel, jet fuel, and other products,
- shipped to fuel terminals,
- and then trucked to retailers or gas stations.
The federal fuel tax is assessed upstream from the retailer. In other words, by the time that gallon of gas reaches your vehicle, the federal tax has already been collected.
Recent economic research into the 2022 state-level gas tax holidays (during the COVID-19 pandemic) found an average pass-through rate of only 79%.
In practical terms: for every 10 cents state governments cut from gas taxes, the consumer saw only about 8 cents in actual savings.
One major complication: by the time fuel reaches your neighborhood gas station, some, if not all, of the tax savings may already have been absorbed elsewhere in the supply chain.
Then there’s the reality of the gas station business itself.
Station owners constantly adjust prices based on competition, traffic, delivery costs and consumer demand. If nearby stations are charging more, retailers may keep prices elevated, even during a tax holiday. Economists also warn that producers and wholesalers can raise pre-tax fuel prices to absorb part of the tax cut themselves, reducing the savings drivers actually see.
Let’s look at a practical example: with gas at $4.50 a gallon, a full 18.4-cent federal tax suspension on a driver filling a 15-gallon tank would translate into roughly $2.76 in savings (assuming every penny of the tax cut is passed along to consumers).
Three bucks.
The geography of gas
Three bucks may not sound like much, but it depends on your circumstances. Where you live also determines how much of those already-uncertain savings you’d actually keep.
For some drivers that can be an extra $3 a month, for others it’s $3 a week. For someone with a long commute, large truck or SUV, it might be $3 every one or two days. But your vehicle and driving habits are only part of the equation – your zip code matters too.
Gasoline prices are deeply regional, shaped by geography, transport costs, environmental regulations, refinery capacity, and local taxes. States with the highest price per gallon of gasoline include California, Washington, Hawaii, Oregon and (strangely enough) Alaska. On the low end: Oklahoma, Mississippi, Louisiana, Texas, and Arkansas.
Geography matters.
In many cases, the farther fuel has to travel from refineries and distribution hubs, the more expensive it becomes. California is an outlier and, unfortunately for residents, checks several expensive boxes: they have isolated fuel markets, there is limited pipeline connectivity, and of course, California has some of the highest state taxes on fuel in the country.
Another major reason for regional price differences is because of something known as reformulated gasoline, or RFG.
Required in parts of the country with higher air pollution, reformulated gasoline is specially blended to burn cleaner and reduce smog-forming emissions. Seventeen states and the District of Columbia use RFG in metro areas – California, a state with some of the strictest environmental fuel requirements in the country, uses RFG blends in the entire state.
RFG is not the same as what we know as “summer blend” fuel (but in some places, they do overlap). Summer blend fuel is a seasonal gas formula designed to reduce evaporation during hot weather. That decrease in evaporation directly correlates to a decrease in smog-forming vapors. Some areas, like California, not only are required to have RFG, but in the late spring, they must also switch over to summer blend.
On March 25, 2026, the EPA waived summer gas regulations in an attempt to quell rising fuel costs.
Cleaner fuels tend to cost more to refine, transport and store, and because those fuel blends are often unique to certain regions or are only used during certain times of the year, supply disruptions can create major price spikes. If a refinery producing a specialized blend goes offline because of an emergency or even routine maintenance, replacement fuel may have to come from hundreds, if not thousands of miles away.
In reality, there is no single “U.S. gas market.” America operates as a patchwork of regional fuel markets with different taxes, supply chains, environmental rules, and refining systems.
And while suspending the federal gas tax may sound like easy political relief, that tax also helps pay for the highways, bridges, and transportation systems Americans rely on every day. In other words, the country will be trading short-term relief at the pump for longer-term problems down the road.
Peter, meet Paul
While the federal gas tax may feel small to drivers, it’s one of the primary ways the U.S. government pays the bills for roads, bridges, and transportation infrastructure. Suspending that tax, even temporarily, means the financial hit adds up quickly.
According to data from the Committee for a Responsible Federal Budget, pausing federal gas and diesel taxes would cost the government roughly $875 million every week. Stretch that holiday across a month and the lost revenue climbs to around $3.5 billion.
That money normally flows into the federal Highway Trust Fund – the massive account used to help pay for interstate highways, bridge repairs and transportation projects across the country. As of spring 2026, the Highway Account of the federal Highway Trust Fund held roughly $47.6 billion.
But transportation economists and federal budget analysts have warned for years the Fund is already on an unsustainable path. A temporary suspension of the federal gas tax would immediately cut into one of the government’s primary sources of highway revenue at a time when the system is already struggling to keep up.
The federal gas tax has not been raised since October of 1993. Inflation has steadily eroded its buying power, while modern vehicles have become far more fuel efficient – meaning Americans are driving farther while buying less fuel. Add in fully electric vehicles – which use no gas at all – and you can see where this is going.
In simple terms: the system collects less money while the cost of maintaining infrastructure keeps rising.
Federal projections already show the Highway Trust Fund facing serious financial problems within the next few years. According to the Congressional Budget Office, at current spending, the Highway Trust Fund will be exhausted in 2028. The CRFB projects a six-month suspension of the federal fuel tax would make the Fund insolvent by September of 2027. A three-year suspension accelerates the depletion of highway funds to March 2027.
And while President Trump has floated the idea publicly, he cannot suspend the federal gas tax on his own. Congress would need to approve it.
Some lawmakers support the proposal as a form of emergency consumer relief during the economic fallout tied to the war with Iran. Others warn the country could be trading short-term political relief for longer-term infrastructure problems.
Florida tested a version of this idea in 2022, temporarily suspending the state’s gasoline tax by 25.3 cents per gallon for one month. The tax holiday did not apply to diesel, kerosene, or aviation fuel. Not only did the state lose out on around $200 million in fuel tax revenue, but even state officials acknowledged at the time that gas prices are influenced by far more than taxes alone – including supply costs, wholesale pricing, and market fluctuations. Sound familiar?
A final note: ironically, the federal gas tax itself began as a temporary measure.
In 1932, President Herbert Hoover signed the nation’s first federal gas tax into law as part of an effort to stabilize government finances during the Great Depression. Decades later, President Dwight Eisenhower tied the tax directly to construction of the Interstate Highway System.
Nearly a century later, the debate has come full circle.
As war and instability continue to pressure global energy markets, Americans once again find themselves asking the same question: How much future infrastructure are we willing to trade for cheaper gas today?