What a federal gas tax suspension could mean for you

First Citizens Wealth INTEL: Insights and News—Taxation, Election & Legislation

Each month, we'll cover time-sensitive updates on tax, election and legislative developments that could affect you.

What's behind proposals to suspend the gas tax?

The average price of a gallon of gasoline rose more than $1.50 between February and May 2026. With summer driving season underway and costs weighing on both families and businesses, the Trump administration recently proposed a federal gas tax suspension to offer some relief.

The gas tax is an excise tax of 18.4 cents per gallon on gasoline and 24.4 cents per gallon on diesel in the US. Any gas tax suspension would require an act of Congress to become law, but legislators in both chambers have introduced bills—with proposals ranging from a 90-day pause to an 18-month phase-out. Understanding these proposals can help you make more informed decisions and plan with greater confidence.

Who is impacted by a federal gas tax suspension?

Three groups would feel the effects of a temporary gas tax suspension: consumers, business owners and state and local governments.

Consumers

Consumers who drive more during the warmer months could benefit if the full tax is suspended soon. Households filling up regularly could see meaningful savings over a summer of road trips and commuting.

However, there's a catch. Studies of past state-level suspensions show that savings are often only partly passed on to drivers. One widely cited study published in the Journal of Public Economics found that about 70% of the savings were passed on to consumers through lower prices, while the remaining savings were absorbed by gas stations, refiners and distributors. As a result, the real-world benefit may be smaller than the headline number.

Business owners

Business owners absorbing higher shipping and materials costs from the recent rise in gas prices could also benefit from a gas tax suspension. Companies that buy fuel directly or rely on transportation-heavy supply chains could save up to 24.4 cents per gallon on diesel fuel.

For businesses running fleets or shipping goods over long distances, even a partial pass-through could help ease margin pressure.

State and local governments

At the federal level, the gas tax is the primary source of revenue for the Highway Trust Fund, which pays for building and maintaining highways and supporting public transit. A small portion—0.1 cent per gallon—funds the Leaking Underground Storage Tank Trust Fund, which helps finance the cleanup of petroleum leaks that threaten groundwater.

The Bipartisan Policy Center estimates that suspending the gas tax for 5 months could reduce federal revenue by about $17 billion. If this revenue isn't replaced, states and local governments could face slower federal reimbursements and delays for highway and transit projects. Several proposals aim to backfill the gap with transfers from the Treasury's general fund, although this approach would add to the federal deficit.

Additional highway and transit-related funding strategies are being explored to offset the loss of funds. Approaches on the table include relying more on core tax revenue, reducing certain oil and gas tax subsidies, charging fees for electric vehicles and adopting mileage-based road usage fees that charge by the mile rather than by the gallon.

What to do now

For now, Congress hasn't enacted a suspension, and the federal gas tax hasn't been paused since the Highway Trust Fund was created in 1956. So a useful step is to review short-term finances as legislators consider various proposals.

Consumers may want to revisit summer travel plans and budgets with the understanding that any relief could be partial and temporary. Even if gas tax suspension legislation passes, pump prices remain well above where they stood in February and a suspension wouldn't reverse the broader increase tied to oil markets.

Business owners with significant fuel or shipping exposure should look closely at cash flow and pricing and consider modeling both scenarios—one where a suspension lowers costs modestly and one where prices hold steady—so transportation budgets and customer pricing can flex accordingly. Companies that depend heavily on logistics should pay particular attention to how a short-term suspension could affect demand and, in turn, pricing.

The timing of any federal gas tax suspension remains uncertain. Proposals differ on length and on how to protect highway funding, and passage is far from guaranteed. Watching developments now allows households and businesses to act quickly if a measure moves forward.

Who to talk to now

A comprehensive financial plan should be able to withstand the ebbs and flows of policy changes like this. If you'd like to see how your current plan measures up, a First Citizens Wealth consultant can work with our banking team to help you evaluate how shifting fuel costs and legislative changes may affect your spending and cash flow. We can also help you identify ways to strengthen your financial resilience as conditions evolve.