Momentum is building for a federal gas tax holiday, but reservations among important lawmakers could make enactment difficult. Other new developments are raising hopes for digital asset tax reform, while Republicans continue to try to bridge divides over priorities for a third reconciliation bill.
Federal Gas Tax Holiday
President Donald Trump this week endorsed the idea of a “holiday” from the 18.4 cents per gallon gas tax, and the idea has some bipartisan backing. Sen. Richard Blumenthal, D-Conn., Sen. Mark Kelly, D-Ariz., and Rep. Chris Pappas, D-N.H., introduced companion legislation (S. 4032 and H.R. 7919) that would temporarily suspend the federal gas tax through October 1. On the Republican side, Sen. Josh Hawley, R-Mo., and Rep. Anna Paulina Luna, R-Fla., plan to introduce companion legislation that would suspend the federal excise taxes on both gasoline and diesel (24.4 cents per gallon) for 90 days.
Previous spikes in gas prices have generated support for gas tax holidays in the past, but legislation on the issue has proven difficult to enact. Key Republicans again appear lukewarm to the idea.
Senate Majority Leader John Thune, R-S.D., declined to promise a vote on the measure, warning about the implications to the highway trust fund. House Speaker Mike Johnson, R-Calif., also declined to promise a vote.
“You have to look at any unintended consequences and evaluate all that, so I’m not yet ready to project it,” Johnson told reporters after Trump’s comments. “But I certainly find it to be an intriguing idea.”
BDO Takeaway
Legislation could prove difficult, but if it moves, it could offer a legislative vehicle to carry other unfinished tax priorities. If enacted, a gas tax holiday would likely reduce gas and diesel prices by amounts similar to their effective tax rates. Businesses that purchase fuel in bulk can consider evaluating vendor agreements and contracts so that any reductions in tax rates are fully reflected in pricing.
Reconciliation
Republicans are working to complete a $72 billion reconciliation bill to fund customs and immigration before a June 1 deadline set by Trump. Several hangups could threaten the bill, which generally cannot carry tax provisions without facing a fatal 60-vote point of order.
Republicans are still discussing the possibility of a broader third reconciliation bill that could potentially carry tax provisions, but they remain divided over priorities. Some of the provisions under consideration include:
- Measures aimed at “affordability”;
- Cuts targeting “fraud” in tax credit and entitlement spending;
- Benefits for first-time homebuyers;
- Iran war and other defense spending;
- Healthcare provisions; and
- Voter identification provisions.
BDO Takeaway
A third reconciliation bill is more speculation than reality at this point and would be difficult to enact, given the competing priorities and approaching election. If the effort does gain traction, tax provisions would likely be included.
Crypto Tax Reform
The House Ways and Means Committee held a bipartisan members meeting this week to generate support for legislation that would reform the tax treatment of digital assets.
House Ways and Means Committee Chair Jason Smith, R-Mo., has said he is close to releasing a draft bill but does not want to move forward unless it is a bipartisan effort.
The overall legislative effort to address digital assets received another boost this week with the Senate Banking Committee marking up a House bill (H.R. 3633) to establish a regulatory framework for digital commodities. The bill had been held up over stablecoin provisions, and many in the banking industry remain unhappy with the current version. Democrats also have reservations about key issues.
BDO Takeaway
Advancement of the broader crypto regulatory bill could build momentum for the companion legislation to reform the tax treatment of digital assets. It is one of only a handful of issues with the potential for bipartisan action this year, but lawmakers first need to resolve many outstanding policy disagreements. See our prior write-up, Congress Working to Reform Tax Treatment of Digital Assets, for more information.
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