Capitol Hill Recap: Gas Tax Pause Faces Unclear Path

With gas prices pushing near $5 a gallon in much of the country, following the supply disruption caused by the military conflict in Iran, both parties are looking for ways to supply cost relief to Americans. President Trump on Monday said he was looking at suspending the federal gas tax, an 18.4-cent levy that provides revenue to the Highway Trust Fund. But that would require action from Congress, which has so far given mixed reactions to the idea.

Pausing the gas tax is an idea that is often raised in times of high prices, from politicians in both parties. In the summer of 2008, some presidential candidates proposed a temporary suspension, although then-Sen. Barack Obama opposed the proposal, calling it a “gimmick.” In 2022, as the Ukraine conflict caused a spike in gas prices, President Biden called for a short pause, although it failed to gain traction in Congress.

Many economists and tax experts doubt it would provide much relief, while costing the Trust Fund, which covers highway and road construction projects, billions. (In 2008, economist Paul Krugman claimed that it wouldn’t reduce gas prices at all—although he later clarified that this was partly due to the timing of the proposed suspension.)

The Bipartisan Policy Center, a D.C.-based think tank, said that between 60% and 90% of the cost savings from a tax pause would be passed onto consumers, based on examples when states suspended their own excise taxes on gas. That translates into about 10 to 16 cents per gallon.

As President Trump himself noted, that’s a “small percentage” in the overall amount spent on gas, though he added “it’s still money.”

Even harder to predict is how consumers might respond—if, for instance, there would be a rush on gasoline that could push prices higher. Some also wonder if a pause in the gas tax could lead to higher prices when it’s finished. And the Trust Fund would need to be replenished, adding to the national debt.

While there are members of Congress on both sides of the aisle who support the idea, there’s also enough opposition to make it an uncertain vote. Because both chambers have already taken the first steps, it’s too late to include it in the reconciliation bill currently being considered to fund certain agencies in the Department of Homeland Security. That means it would need 60 votes in the Senate, a high margin even for more popular initiatives.

For those reasons, most expect this to be another time when the idea of a gas tax suspension is discussed, but not acted on. But with this Congress and president, no one can be sure.

Recent Tax Pieces:

Trump Administration Pushes I.R.S. to Identify Undocumented Immigrants – Andrew Duehren and Zolan Kanno-Youngs, The New York Times:

The Trump administration is leaning on the Internal Revenue Service to upend how undocumented immigrants can file their taxes, as officials discuss changes that could force people to tell the agency about their immigration status or disengage from the tax system entirely.

At the center of the deliberations between Trump administration officials and the I.R.S., described by three people familiar with them, are potential changes to a nine-digit code, called an individual taxpayer identification number or ITIN, that people without a Social Security number can use to file their taxes.

Lawmakers Float Allowing Charitable Gifts From 401(k) Plans – Patrick Hoff, Law360 Tax Authority ($):

A bipartisan group of federal lawmakers on Wednesday introduced a bill that would allow workers to make tax-free charitable donations directly from their employer-sponsored retirement plans, building on a section of the retirement policy overhaul known as Secure 2.0.

Reps. Don Beyer, D-Va., and Mike Kelly, R-Pa., as well as Sens. Kevin Cramer, R-N.D., and Chris Coons, D-Del., put forward the Charity Parity Act, which would allow taxpayers to make qualified charitable distributions from 401(k) and 403(b) plans. According to a news release, the legislation was cosponsored by Sens. Mark Warner, D-Va., and Roger Marshall, R-Kan., both of whom sit on the Senate Finance Committee.

New IRS Easement Settlement Offer Eliminates Up-Front Payment – Kristen A. Parillo, Tax Notes ($):

The new offer — the fourth one issued since June 2020 — applies to cases docketed in the Tax Court and to nondocketed cases, meaning those under audit or seeking reconsideration by the IRS Independent Office of Appeals immediately after an audit. There are now 740 easement cases docketed in the Tax Court and 400 cases under exam, the IRS said.

Elimination of the up-front payment requirement, combined with the agency’s string of judicial victories in syndicated easement cases, might make the new offer more attractive for some taxpayers.

“The longer these cases remain unresolved, the greater the potential exposure becomes — including penalties, interest, and litigation costs,” Carolyn A. Schenck, a former IRS national fraud counsel now with Caplin & Drysdale, told Tax Notes. “Many taxpayers may conclude this settlement opportunity represents the most rational off-ramp available.”

Silicon Valley’s Congressman Is Taking on AI, Hawking Wealth Tax – Max Chafkin and Eliyahu Kamisher, Bloomberg Tax ($):

That Dec. 26 post marked a pivot point in Khanna’s career. For years, he’d been seen as the tech industry’s most reliable defender in Congress, a progressive who also happened to be pro-crypto and pro-artificial intelligence. When those angry replies started rolling in, many were from centimillionaires and billionaires, some of whom he’d recently counted as friends. They were mad about his implicit endorsement of a wealth tax, but also about his tone. “Ro has done a speed run alienating every moderate I know who has supported him,” began one tweet from Martin Casado, a partner at the venture firm Andreessen Horowitz. “Beyond being totally out of touch with that faction of his base, he’s devolved into an obnoxious jerk.”

When Congress Reformed the IRS Without Starving It – Joseph J. Thorndike, Tax Notes ($):

Is the taxing power unique? According to Chief Justice John G. Roberts Jr.’s jurisprudence, the answer appears to be yes. Or maybe “sometimes” is the better answer.

The power to tax is, in Roberts’s words, Congress’s “birth-right power.” Learning Resources Inc. v. Trump, No. 24-1287, at 15 (U.S. 2026). In two cases separated by almost 14 years, the chief justice has adjudicated a signature policy of the sitting president and looked to the taxing power as a key source of authority or lack thereof. Roberts’s jurisprudence on the taxing power suggests that he views it as special, even among core legislative powers. But the exact contours of the chief justice’s view of the taxing power are harder to ascertain.