We are all hurting from high gasoline prices, so two of our three Presidential candidates have found it politically advantageous to propose a “gas tax holiday,” in which, for the course of this summer, the 18.4 cent per gallon federal gas tax would be suspended. There are just a few problems with this idea:
1. Like I said, most economists are in agreement that the oil companies would not pass on the savings in lower prices to you and me, because they don’t have to. This would instead be a $10 billion windfall for the oil companies (who probably don’t really need it) and they’ll just hike the prices up drastically at the end of the summer when the tax returns. As Reuters wrote recently: “Economists said that since refineries cannot increase their supply of gasoline in the space of a few summer months, lower prices will just boost demand and the benefits will flow to oil companies, not consumers. “You are just going to push up the price of gas by almost the size of the tax cut,” said Eric Toder, a senior fellow at the Urban-Brookings Tax Policy Center in Washington.”
2. The loss in revenue to the federal and state governments would be about $10 billion, which, as MSNBC tells us, would usually “help pay for highway projects in nearly every town through a dedicated trust fund.”
3. This “gas tax holiday” has no chance of passing Congress, mainly due to the above reasons: Congress, believe it or not, is full of many thoughtful people who are not currently running for President. The government cannot afford that loss of revenue at this time. Here I should mention that Hillary’s special touch – what makes her plan a little different from McCain’s (who doesn’t even consider the actual effects of his plan) is that it would be balanced off by a “windfall profits tax” on the oil companies. Again, that also has no chance of passing Congress, and even less of a chance of being signed by our Oilman President.
4. Say that the oil companies somehow, either out of the goodness of their hearts or due to some clever coercion, passed on the savings to us at the pump. It’s still only 18 cents a gallon, or about $2.35 each time you fill up, adding up to roughly a $30 to $40 savings over the summer for the average driver. And, assuming that did make a difference to us, we would just be motivated to drive more, exacerbating pollution and global warming, as well as adding to demand and – of course – driving up the price to what it originally was or higher.
Who’s yanking your chain?
When asked this morning by ABC News’ George Stephanopoulos if she could name a single economist who backs her call for a gas tax holiday this summer, HRC said “I’m not going to put my lot in with economists.”
I know several of the economists who have been advising Senator Clinton, so I phoned them right after I heard this. I reached two of them. One hadn’t heard her remark and said he couldn’t believe she’d say it. The other had heard it and shrugged it off as “politics as usual.”
–from Robert Reich’s blog
…McCain argues the holiday would mean that drivers would “have a little money left over, maybe to buy a better meal, maybe to buy something for their kids.”
…he said the proposal would have a trickle-down effect, and “help to spread relief across the American economy.”
“I know a lot less about economics than I do about military and foreign policy issues. I still need to be educated.”
SEN. OBAMA: You’re right, Tim, this defines, I think, the difference between myself and Senator Clinton. This gas tax, which was first proposed by John McCain and then quickly adopted by Senator Clinton, is a classic Washington gimmick. It, it is a political response to a serious problem that we have neglected for decades. Now, here’s, here’s the upshot. You’re looking at suspending a gas tax for three months. The average driver would save 30 cents per day for a grand total of $28. That’s assuming that the oil companies don’t step in and raise prices by the same amount that the tax has been reduced. And, by the way, I have some experience on this because in Illinois we tried this when I was in the state legislature, and that’s exactly what happened. The oil companies, the retailers were the ones who ended up benefiting.
MR. RUSSERT: You voted for it, too.
SEN. OBAMA: I did. Exactly. And that…
MR. RUSSERT: When gas was only $2 a gallon.
SEN. OBAMA: And, and that’s my point. I voted for it, and then six months later we took a look, and consumers had not benefited at all, but we had lost revenue.
MR. RUSSERT: So you learned from a wrong vote.
SEN. OBAMA: Yeah, I learned from a mistake. And, in addition, what happens is, is that this would come out of the Federal Highway Fund that we use to rebuild our roads and our bridges. And if we don’t have that fund, then we’re looking at thousands of jobs being lost…
And what I’ve said is, look, people do need serious relief. They are, are getting hammered. I mean, people who–can’t go on job searches because they can’t fill up their gas tank. And so what I’ve said is, let’s accelerate a-
-the second half of a tax stimulus proposal that I had put forward that would put, immediately, hundreds of dollars into people’s pockets to get through the summer; let’s pass a permanent middle-class tax cut, $1,000 per family, to offset the payroll tax to deal not just with rising costs of gas, but also rising costs of food, rising costs of prescription drugs; and, most importantly, let’s invest in alternative fuels, raising fuel efficiency standards on cars, and let’s get serious about reducing consumption of oil, which is the only way that, over the long term, we’re going to reduce, we’re going to reduce gas prices.And, you know, I have to say that if Senator Clinton or John McCain had stood up in previous years for increases in fuel efficiency standards, in getting serious about a–an energy policy that is freeing ourselves from dependence on foreign oil, then we would not be in this same situation in the first place. And I don’t want, 20 years from now, to have a bunch of politicians proposing a suspension of the gas tax holiday when gas is $8 or $10 a gallon because we failed to act now. Now is the time for us to act, and I think the people of Indiana and North Carolina understand that.
MR. RUSSERT: It’s a pander?
SEN. OBAMA: Yes.
Leave a Reply