Gas Tax Holiday: Political Pandering, Not Solutions

The proposed Clinton/McCain gas tax holiday is political pandering at its finest. One of the most pressing issues on voters minds is the high prices of gas. But what will a removal of the gas tax do? McCain and Clinton claim that lifting the 18.4 cent per gallon federal tax would drop the price at the pump by the equivalent 18.4 cents. This translates into a 4% drop which would save summer drivers $2 on every $50 fill-up... IF lifting the tax resulted in a 18.4 cent drop in the price at the pump.

Even libertarian Jerry Taylor, a fellow for the Cato Institute, thinks lifting the tax is a bad idea, calling the proposal, "A holiday from reality." Taylor added, "What would happen more likely than not, gas taxes would be cut, but pump prices wouldn't go down, service stations would just continue charging what they are charging."

Sam Stein of the Huffington Post cuts to the chase in his latest: "Expert Support For Gas Tax Holiday Appears Nonexistent":

I took the task upon myself. I would call experts from all sides of the ideological aisle to get a sense of where the debate stood. In the end, every single analyst I surveyed judged the gas tax holiday proposal to be, roughly speaking, a silly, superfluous, or outright pandering idea.

As I noted yesterday, even economists in Clinton's corner find the proposal objectionable: The NY Times' Paul Krugman calls Clinton's plan "pointless and disappointing."

In his column "Dumb as We Wanna Be," economist Thomas Friedman, who is often criticized for his belief that the free market will naturally solve the most pressing issues facing our environment, notes the Clinon-McCain plan "is so ridiculous, so unworthy of the people aspiring to lead our nation, it takes your breath away."

Even those who are hit the hardest by the soaring prices of fuel do not support the proposal. In an offical release, the American Truckers Association stated the following:

ATA did not ask for this legislation. And we believe it is only a very short term answer that does not do anything to address the longer term issue of rising fuel prices.

So what are the issues with the gas tax? Or, better yet, where do we begin?

The federal gas tax supports the Federal Highway Trust Fund. In turn, the revenue Highway Trust Fund invests in infrastructure i.e. building new roads, bridges, tunnels, highways, maintenance, etc. At a time when the construction industry is already feeling the crunch from the housing crisis, halting investment in infrastructure during peak construction season (northern states typically do all of their road construction in the summer) would further devastate the construction industry and send ripple effects throughout the economy. Sen. Clinton proposes to replace the revenue with a tax on the windfall profits of oil companies. Estimates show that the windfall profits tax would not be able generate the equivalent amount of revenue. Additionally, it is a near guarantee that oil companies would counterbalance the losses from a corporate windfall profits tax by raising the price of gasoline!

Next, the gas tax holiday is an environmentalists nightmare. At a time when the government needs to be providing incentives to change commuter behavior and increase investment in R&D for enviromentally sound transportation, the gas tax holiday does just the opposite.

Lastly, I would point out that, as the name suggests, the removal of the gas tax is only for the "holiday" (specifically, the period of the summer spanning from Memorial Day to Labor Day). While the benefits of a marginal reduction in price would be slight, the strain on consumers would be great when the tax is reimposed in the fall.

The proposed "gas tax holiday" is a ploy to garner votes, not an answer to a serious issue. At least most in the media are reading between the lines.

Thursday's New York Times Editorial calls the gas tax holiday ""an expensive and environmentally unsound policy that would do nothing to help American drivers."

The Washington Post Editorial Board sees the proposed Clinton-McCain gas tax holiday for what it is: political pandering.

His opponents no doubt hope that Mr. Obama's stand will prove to be political suicide. We think it qualifies as political courage.

See Clinton's ad attacking Sen. Obama for neglecting to take action on gas prices HERE.

And Sen. Obama's response ad HERE.