Gas tax holiday not worth long-term price
John McCain and Hillary Clinton don’t seem to be getting much traction with their call for a summer gas-tax holiday.
That’s to the long-term benefit of the country.
To be sure, the havoc that the spike in gas prices is playing with family budgets and the national economy should not be trivialized.
The high prices of gasoline means that families are driving less and curtailing driving vacations in order to keep their finances in order.
But the arguments against the holiday are strong ones. The Cato Institute, a libertarian think tank, even referred to the proposed holiday as a “vacation from reality.”
For starters, the so-called holiday might not translate into a cent-for-cent reduction in the price of gasoline.
By lowering the price that consumers pay at the pump, the holiday might boost demand, which would mean that part of gas-tax holiday might be erased by another increase in the retail price of gasoline.
Second, the lift that a gas-tax holiday would give to consumers would be more psychological than substantial. A motorist who drives 1,000 miles a month and averages 20 miles per gallon would save $27.60 over the course of the summer, although a careful consumer might be able to save another buck or two by topping off their tanks just before the tax resumed.
Most importantly, a gas-tax holiday would put a $9 billion dent in the money that the federal government collects for road and bridge construction, which is distributed to states.
The state of Nebraska and the city of Lincoln already are combating shortfalls in the revenue they need to keep pace with repair and construction needs.
McCain has proposed reimbursing the money missing from the highway trust fund by diverting money from general reserves. That probably means that the holiday would end up adding to the national debt. Clinton has suggested replacing the funds with a windfall profits tax on oil companies, but her proposal has met with little support in Congress, particularly in oil-producing states.
The current federal gas tax should be kept in perspective. The tax has been set at 18.4 cents a gallon since 1993. Its buying power has eroded since then. If it had kept pace with inflation the tax would now be set at 26 cents a gallon.
Apparently many Americans are well aware of the drawbacks to the proposed gas-tax holiday. Exit polls in Indiana and North Carolina showed that the proposal was a non-factor. A national CBS/New York Times poll showed 49 percent opposed and 45 percent in favor.
Reaction to the proposal shows that most Americans understand that the short-term relief of a gas-tax holiday is not worth the price that would be paid down the road.
That’s to the long-term benefit of the country.
To be sure, the havoc that the spike in gas prices is playing with family budgets and the national economy should not be trivialized.
The high prices of gasoline means that families are driving less and curtailing driving vacations in order to keep their finances in order.
But the arguments against the holiday are strong ones. The Cato Institute, a libertarian think tank, even referred to the proposed holiday as a “vacation from reality.”
For starters, the so-called holiday might not translate into a cent-for-cent reduction in the price of gasoline.
By lowering the price that consumers pay at the pump, the holiday might boost demand, which would mean that part of gas-tax holiday might be erased by another increase in the retail price of gasoline.
Second, the lift that a gas-tax holiday would give to consumers would be more psychological than substantial. A motorist who drives 1,000 miles a month and averages 20 miles per gallon would save $27.60 over the course of the summer, although a careful consumer might be able to save another buck or two by topping off their tanks just before the tax resumed.
Most importantly, a gas-tax holiday would put a $9 billion dent in the money that the federal government collects for road and bridge construction, which is distributed to states.
The state of Nebraska and the city of Lincoln already are combating shortfalls in the revenue they need to keep pace with repair and construction needs.
McCain has proposed reimbursing the money missing from the highway trust fund by diverting money from general reserves. That probably means that the holiday would end up adding to the national debt. Clinton has suggested replacing the funds with a windfall profits tax on oil companies, but her proposal has met with little support in Congress, particularly in oil-producing states.
The current federal gas tax should be kept in perspective. The tax has been set at 18.4 cents a gallon since 1993. Its buying power has eroded since then. If it had kept pace with inflation the tax would now be set at 26 cents a gallon.
Apparently many Americans are well aware of the drawbacks to the proposed gas-tax holiday. Exit polls in Indiana and North Carolina showed that the proposal was a non-factor. A national CBS/New York Times poll showed 49 percent opposed and 45 percent in favor.
Reaction to the proposal shows that most Americans understand that the short-term relief of a gas-tax holiday is not worth the price that would be paid down the road.
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