NEWS ARTICLE

Federal policy makers should consider a temporary gasoline-tax holiday to ease the burden of soaring fuel prices, Treasury Secretary Janet Yellen said on Sunday.

"Gas prices have risen a great deal and it's clearly burdening households," she said on ABC's "This Week." "That's an idea that's certainly worth considering."

Ms. Yellen's comments come as several states, including Connecticut and Maryland, have completed plans to temporarily halt gasoline taxes at the state level. But in the U.S. Congress, Democratic-led efforts to temporarily stop collecting the federal gasoline tax of 18.4 cents a gallon have yet to gain traction.

Across the world, fuel prices have surged following Russia's invasion of Ukraine, which disrupted the global oil market. Rising oil prices along with increased demand as the summer driving season kicks off have driven the average cost of a gallon of unleaded fuel in the U.S. to $4.98 on Sunday, according to AAA. That is up from about $3 a year ago.

Coalitions of construction and business interests and labor groups say gasoline-tax decreases don't necessarily lead to consumer relief since they don't prevent retailers from raising base pricesand may encourage them to do so. They also say state and federal gasoline-tax decreases could jeopardize much-needed road and bridge improvements, including projects to be funded by last year's $1 trillion bipartisan infrastructure law.

Harvard University's Lawrence Summers, a former Treasury secretary, criticized the idea on Sunday as a "gimmick...you eventually have to reverse," speaking on NBC's "Meet the Press." Meaningful steps to address inflation, he said, would include lowering drug prices by giving Medicare the power to negotiate with pharmaceutical companies.

Medicare is a federal health insurance program for people who are 65 and older or have specific disabilities

Brian Deese, who heads the White House's National Economic Council, listed several items the administration is targeting to fight inflation prescription drug prices, utility costs, tax reform, semiconductor supply, Chinese tariffsbut didn't mention a federal gasoline tax holiday.

"Prices are unacceptably high right now and that's why the president has said we need to make this our top economic focus," he said on CBS' "Face the Nation."

The gasoline-tax issue cuts across traditional partisan politics, with both Republicans and Democrats at the state level supporting various relief measures.

In the U.S. House and Senate, however, Republican leaders largely oppose suspending the federal gasoline tax. Senate Minority Leader Mitch McConnell (R., Ky.) has accused Democrats of playing "political games," noting that any gasoline-tax relief would expire soon after midterm elections.

Reference

Ackerman, A. (2022). Gasoline Tax Holiday 'Worth Considering,' Yellen Says; Treasury secretary says high fuel prices are a burden for U.S. consumers, but others say cutting the tax doesn't necessarily offer consumer relief. Wall Street Journal (Online)

QUESTIONS

Using the news article above that discusses the economic concept (taxes and consumer or producer surplus) The Term paper should have the following structure: 1. Abstract (0.5 of a page) - the short description of the concepts, problems, questions discussed in the Term paper. 2. Introduction (0.5 of a page) (optional) 3. Literature Review (about 2 pages) - please compare and contrast the opinions of the authors of the articles, and present the important information, data, and statistics to support your conclusions. It is important that the Literature review is written in your own words with small quotes from the article. All quotes must have references in accordance with the 7th Edition APA Style. 4. Discussion (about 2 pages) - Your task for this part of the Term paper is to analyze the issue described in the articles using the economic concepts and theory learned in this class. Refer to the course content materials and use specific economic vocabulary within your term paper. The articles you choose may not use these exact terms; therefore, it is incumbent upon you to convert the article language into economic language as is appropriate. Include at least one graph in it

5. Conclusion