The Gas Tax Holiday

April 29, 11:27 AMProgressive Politics ExaminerJay McDonough

Previous Next

Comment Print Email RSS Subscribe

Subscribe

Get alerts when there is a new article from the Progressive Politics Examiner. Read Examiner.com's terms of use.

Email Address   Include other special offers from Examiner.com Terms of Use

When Senator John McCain gave his big economic policy speech a few weeks back, it included an interesting proposal; elimination of the 18.4 cents/gallon federal excise tax on gasoline during the summer months.  Acknowledging it wouldn't amount to a lot of money for most folks, Senator McCain asserted it would be a nice psychological boost for consumers (this appears to be a new campaign theme for the Senator; most of our problems are in our heads, we just need to be distracted and our problems won't be so bad, and he's the candidate that most cares about our psyches).

Hillary Clinton climbed aboard as well, claiming she supported the suspension of the gas tax for the summer.  Barack Obama has spoken out against the tax cut.  This now has become a campaign issue within the Democratic primary battle.  Senator Clinton uses Obama's unwillingness to cut the tax as evidence Obama is out of touch with the electorate.  And so it goes.

A couple data points:

• Gasoline pricing, as we are all aware, has been rising steadily (in fact, an increase in 9.5 cents/gallon in the last week alone).  We have no idea what it will be this summer.
  
• Senator McCain chose the summer as the time for the tax moratorium is because it's the time of year when gasoline demand is highest.
• The gasoline tax is set aside for the Highway Trust Fund, used for roadway and bridge construction and maintenance.
• Gasoline consumption is a direct contributor to global warming.
• Congressional analysts have projected lifting the gas tax for the three summer months will save the average consumer no more than $30.
  

The Washington Post has a column today on the details of the proposal, how much will we save, what will we give up in order to get it and, finally, does it make any sense.

On energy policy, consider the the laws of supply and demand. If high demand is propping up oil prices, cutting fuel taxes will only keep demand high and prevent oil prices from dropping. That will maintain our dependency on foreign oil by keeping demand high. If oil supplies are relatively constant, there will either be shortages or no change in prices. In fact, either McCain’s or Clinton's proposal could effectively hand a small portion of forgone tax revenues to consumers and the rest to oil producers or oil companies in the form of bigger profit margins.

The idea of a gasoline tax holiday also contradicts the presidential candidates’ positions on climate change legislation. All three remaining candidates support a cap-and-trade system that would increase the cost of all fossil fuels that emit carbon dioxide when they are used. The gasoline tax holiday would be doing just the opposite – and gasoline accounts for nearly half of U.S. oil use.

In addition, the gasoline tax is a dedicated revenue stream. That means it's set aside for the Highway Trust Fund, instead of counting in the general use Treasury funds. So any reduction in the tax would either result in a cut in highway spending (never mind all the talk about repairing bridges) or would require a diversion of other tax receipts to replenish the Highway Trust Fund. This would effectively be a subsidy by all taxpayers (including anyone who takes mass transit to work) for people who drive automobiles.

Finally, it’s not as though U.S. gasoline taxes are excessive by global standards. The U.S. gasoline tax was last increased in 1993 as part of the first Bill Clinton budget, and that was a slimmed-down version of what President Clinton had sought. It also pales beside gasoline taxes in Europe, where gasoline prices are more than twice as high.

So, not particularly great policy.   But perhaps smart politics.  And, these days, that may be enough.