Only Congress can cut the diesel tax

OPINION:

With diesel prices hitting all-time highs, the Trump administration is reportedly considering a novel, albeit unlawful, way to circumvent the 24.4-cents-per-gallon federal diesel tax: allow the broader sale of tax-exempt, red-dyed diesel.

Although suspending taxes may poll well, economic laws do not change. A diesel tax holiday will stoke demand rather than expand supply, creating unintended consequences.

Yet this proposal has a far deeper flaw: It violates the Constitution’s separation of powers and the tax code’s plain text.

The Constitution gives Congress, not the president, the exclusive power to lay and collect taxes. Congress passed a law imposing a federal excise tax on diesel. However, it chose to exempt specific versions of diesel used in trains, farm machinery and construction equipment, as well as school buses and vehicles used for intracity transit, from this tax.

Here is where tax-exempt, dyed diesel comes from.

To simplify the diesel-tax exemptions, Congress enacted the modern dyed-diesel mechanism. The federal diesel excise tax does not apply if three conditions are met: The Treasury secretary determines that the fuel is “destined for a nontaxable use,” the diesel is “indelibly dyed by mechanical injection” according to Treasury regulations and the diesel meets the Treasury’s marking requirements.

Although the Treasury secretary has discretion over the color and type of dye used and the required markings, he does not have the authority to arbitrarily determine which uses are “nontaxable.”

The dyed-diesel exemption explicitly specifies that a “nontaxable use” is limited to those specified elsewhere in the tax code. A person who knowingly possesses or uses dyed diesel for a taxable purpose is in violation of the law, and penalties can reach $10 per gallon.

Dye lets inspectors know at a glance whether diesel is exempt from the federal excise tax. It is an enforcement tool for congressionally authorized exemptions, not a magic wand for the Treasury secretary to create new ones. The Treasury secretary may certify that a particular load of diesel is headed for a tax-exempt use, but he may not declare ordinary highway diesel “nontaxable.”

Make no mistake: The stakes reach well beyond diesel.

Thankfully, our Constitution does not subject taxation to the whims of a single politician or bureaucrat.

Congress alone holds the power to tax, as the Supreme Court reminded this administration in February, when it ruled 6-3 that President Trump unlawfully used emergency powers to impose sweeping tariffs. Those tariffs are estimated to cost the average household $1,300 in 2026. A president who can waive a tax by fiat can also raise one by fiat. The Constitution denies him this power.

Left unchallenged, this is just another attempt by the Trump administration to circumvent Congress’ taxing power by twisting clear statutory language. It could embolden future presidents to unilaterally waive taxes on politically favored industries or impose new taxes on disfavored ones.

The economics only compound the problem. Prices are climbing because of scarcity, and the way to bring them down is to expand supply, not stimulate demand.

Dye adds nothing to the overall supply of diesel. The military campaign to eliminate the Iranian nuclear weapons program is just one driver behind higher diesel costs. Regulations on fuel blends and refining have artificially suppressed supply, and reduced refining capacity constrains diesel supply — even as domestic oil extraction is near all-time highs.

Sparking more diesel demand with a tax holiday, rather than spurring more supply, will bid up the pre-tax price of existing supply, pitting everyday drivers against farmers, whose diesel purchases are already tax-exempt.

This well-intentioned “fix” exacerbates the problem. Farmers, truckers and families deserve real relief.

Congress should focus on root causes and advance permanent solutions, starting with the blending and refining rules that suppress supply. If it wants a diesel tax holiday, it can pass one, the president can sign it, and both can answer to voters for any negative results.

Yes, this path is slower and more uncertain than a Treasury announcement. That is by constitutional design. We are a nation of laws, not of men. Dye can mark diesel that Congress has exempted from taxation. It cannot change a law that the administration would rather not enforce.

• Joel Griffith is a senior fellow at Advancing American Freedom.