Story originally printed in the La Crosse Tribune or online at www.lacrossetribune.com
Published - Sunday, May 04, 2008
Gas tax holiday won’t help, and sends wrong message
Republican John McCain and Democrat Hillary Clinton have both proposed that the government stop charging consumers the 18.4-cent federal gas tax from Memorial Day to Labor Day.
They say it would help beleaguered motorists cope with the sharp increase in gasoline prices.
But their plans are empty promises, and bad policy from both a practical and philosophical standpoint.
First the practical: There is little reason to assume that consumers would see much benefit from the “tax holiday.” During the summer heavy-driving season, refineries are working hard to produce enough fuel, and prices go up. If the price is lower momentarily, people will drive more, and the price will go up as a result of the impact on gasoline supply and refinery capacity.
The Washington Post quoted Harvard economics professor N. Gregory Mankiw, who argued that the biggest beneficiary of the tax holiday will be the oil companies, not consumers.
“What you learn in Economics 101 is that if producers can’t produce much more, when you cut the tax on that good, the tax is kept ... by the suppliers and is not passed on to consumers.”
There also is a political and philosophical reason to avoid the tax holiday. And that is the state of our roads, highways, bridges and other infrastructure. The United States faces a crisis in infrastructure. Much of our highway system was built 30 or more years ago and is in need of repair and replacement. And don’t forget last year’s disastrous bridge collapse in Minneapolis, in which 13 people died.
McCain and Clinton’s proposed gas tax holiday will cost the federal government $9 billion, money that otherwise could be used for repair and maintenance of roads, highways and bridges.
To his credit, Barack Obama, the other Democratic presidential candidate, has resisted the siren song for tax-cut promises during an election campaign.
He once supported temporarily suspending the Illinois gas tax in 2000, but apparently has learned the error of his ways.
“We cannot deliver on a better energy policy unless we change how business is done in Washington,” he said at a recent campaign rally. “That’s what you need from a president — someone who’s going to tell you the truth.”
The truth is that the gas tax holiday is a political stunt that will enrich the oil companies more than it will help the consumers — and it will make it tougher to make the road repairs we need to make.
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