Gas tax unpopular - frankly, I’m surprised
Jed | May 7, 2008The idea of a “gas tax holiday” this has been in the news a lot recently because it’s being pushed by 2 presidential candidates and rejected by another. Aside from the merits (or lack thereof) of such a concept, it seemed like political pandering to me. But usually this type of pandering works.
Which is why I was so surprised to hear that, in a recent poll by CBS and the NY Times (warning: PDF), only 45% of Americans think that suspending the gas tax this summer is a good idea, while 49% disapprove of the plan (see page 15, questions 49 and 50). Not only that, but 70% of those polled felt that the candidates had suggested the gas tax holiday only to help themselves politically and not because it will provide real relief from high prices.
It appears that Americans have actually looked at the details and thought about the issue and its consequences. Awesome!
In case you’re still on the fence about the issue, here are some of the reasons economists feel the gas tax holiday is a bad idea:
- It would only shave 18 cents off the price of a gallon of gas which is now about $4/gallon. On average that’s only a $30 savings per person for the summer
- 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. So essentially the price of gas will increase by almost the size of the tax cut.
- The federal Highway Trust Fund, which finances road projects nationwide, is already facing a $3.4 billion shortfall. And the federal transportation department says every $1 billion in highway spending creates 34,779 jobs, which means the a gas tax holiday could cost 300,000 construction jobs.
- To provide households in need with relief it’s more effective to offer a direct rebate instead of gas tax relief. Not all of the tax relief from a gas tax holiday will be passed on to consumers. Some will likely be kept by refiners. And what about families that don’t drive much?
- Eliminating the tax will lead to increased consumption of gasoline. It’s basic economics - reduce the price and people will use more of it. It sends the wrong signal on energy efficiency and is at odds with the need to combat climate change by encouraging lower U.S. carbon emissions.
Doesn’t sound like a good idea once you get all the details, huh?
I don't listen to elite economists! :-) http://www.nytimes.com/2008/05/05/us/politics/04cnd-campaign.html?hp Pressed by Mr.
Jason LevyI don’t listen to elite economists!
http://www.nytimes.com/2008/05/05/us/politics/04cnd-campaign.html?hp
Pressed by Mr. Stephanopoulos to name a single economist who supports
her plan, Mrs. Clinton indirectly revived the image of Mr. Obama as an
elitist — an argument she made before the Pennsylvania primary — in
noting that “elite opinion” against the gasoline tax suspension did
not reflect the pocketbook concerns of financially struggling
Americans. Mr. Obama opposes the gasoline tax holiday.
“I think we’ve been for the last seven years seeing a tremendous
amount of government power and elite opinion basically behind policies
that haven’t worked well for the middle class and hard-working
Americans,” she said.
Rather than cite an economist who sided with her plan, Mrs. Clinton
continued arguing that the experts were wrongheaded.
“I’m not going to put in my lot with economists,” she said. A few
moments later, she added, “Elite opinion is always on the side of
doing things that really disadvantages the vast majority of
Americans.”