OPINION & EDITORIAL
Gas tax holiday pure pandering
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by Andrew Wagner
Friday, May 2, 2008
For months, the high price of gasoline has been a continual topic of conversation. Every other week, it seems the news media reports the price of crude oil hitting record highs, and the price of gasoline jumps ever higher as the summer season approaches.
So I doubt anyone was surprised to find the conversation jump into the realm of politics when Republican presidential candidate John McCain proposed a temporary federal “gas tax holiday” from Memorial Day to Labor Day to help Americans afford to fill up their tanks. Following Mr. McCain’s announcement, Democratic presidential candidate Hillary Clinton also jumped on the gas tax holiday bandwagon.
The federal gasoline tax amounts to 18.4 cents per gallon, which the oil refineries pay when they refine the oil. The gas tax holiday would suspend the tax for approximately three months from the end of May to the beginning of September. The candidates are pushing this as a tool to help combat higher gasoline prices. However, although the issue appears to be simple, even a temporary stoppage of the federal gas tax is a complex policy issue that should not be thrown around simply to pander to voters.
The biggest issue with suspending the gas tax is how to replace the money that it would have otherwise brought in. All of the gas tax revenue goes into two accounts in the Federal Highway Trust Fund: the Highway Account and the Mass Transit Account. These accounts supply a large proportion of the highway infrastructure aid the federal government hands over to the states every year, which has been in operation since the 1950s.
However, a Government Accountability Office study of the trust fund and its future in 2006 found that even if economic growth continued at a steady 3 percent pace, the trust fund was no longer receiving enough money to cover the aid given to the states. According to their projections, the trust fund would slowly drain its reserves and be unable to meet its commitments by 2010.
Given that economic growth in the last quarter was running at a 0.6 percent annual rate, the outlook is already not good for the continued ability of the Highway Trust Fund to continue disbursing aid. If the federal gas tax were temporarily suspended this summer, there is no doubt the day of reckoning for the trust fund would come sooner rather than later. Considering the already poor state of American transportation infrastructure, cutting a key part of the funding for its maintenance seems a particularly foolish idea.
Even if the gas tax money was replaced from elsewhere to continue infrastructure funding, there is a good chance it will simply be added to the deficit. Ms. Clinton’s idea to institute a windfall profit tax on the oil companies seems unlikely to get passed, and from what I understand, Mr. McCain has simply suggested replacing the money from the general budget, which is already in a massive deficit.
On top of the loss of tax revenue, the price of gasoline may very well not even go down. Oil refineries are no longer making profits themselves due to the high price of crude oil. If they no longer have to pay the 18 cent gas tax, they could simply maintain prices at the current level and actually make a profit on the product that they sell. Even if the price did drop 18 cents, the savings for the entire summer would be marginal at best. While it may seem like a lot of money for many Americans, the tradeoff in terms of infrastructure decay is not worth it.
Finally, I seem to remember Congress ramming through an economic stimulus package that handed out $600 to most of America’s taxpayers a couple months back. That legislation alone added $110 billion to this year’s budget deficit. Consider the small amount of money the gas tax holiday will save American families compared to the amounts given out in the tax rebates. Does the country need another addition to the deficit, given the money is already being reimbursed to taxpayers? I don’t think so.
John McCain and Hillary Clinton have raised an issue perfect for the sound bite. Who doesn’t want fewer taxes? As long as they don’t talk about the deeper issues, the media probably won’t either. After all, they are no longer in the business of reporting what the best policies actually consist of; without seeing these more complex issues, Americans may well see the tax holiday as a good idea. Hopefully, common sense and cooler heads will prevail elsewhere, and this idea will die the quiet death it deserves.
Andrew Wagner (awagner@badgerherald.com) is a junior majoring in history and political science.
Anonymous (May 2, 2008 @ 12:21am):
the chinese are drilling for oil off the coast of cuba. there is apparently 15trillion dollars of oil under north dakota. there is oil everywhere. there is nuclear power available, abundant clean coal. can we overcome the radical environmentalists and compromise with them by commencing an energy policy which will reduce pollution, create jobs, include and incentivize american companies and scientists, renew american exceptionalism, and most importantly stop funding both sides of a war? where is the leader who will forge this movement? it was mitt romney. it will be an interesting day when we invent it and the middle east has to export um something uh else. DIG
Anonymous (May 2, 2008 @ 11:24am):
The gas tax rebate or holiday (or whatever you may want to call it) is nothing but political pandering at its WORST!
Anonymous (May 3, 2008 @ 4:32pm):
Well, maybe, but so is Obama's promise of
free health care for all and his promise to
end the Iraq war. Personally, I think the
gas tax is too high, so I support the Clin-
ton/McCain proposal and I hope the Wisconsin
legislature does something similiar.
Anonymous (May 3, 2008 @ 4:47pm):
How much money do we give to Israel and Saudi Arabia every year as "foreign aid"? Maybe we should have a "foreign aid holiday" instead.
Anonymous (May 4, 2008 @ 10:05am):
4:32, you think the gas tax is too high? Yeah, that money for the roads is just being wasted on fixing potholes and keeping bridges from collapsing.
The gas tax is effectively a consumption tax on those who use a specific service, the interstate highways. In my opinion, it's one of the few just taxes that can be levied upon us. Now, public school taxes for those without children... that's another story.
We need more specific taxation and less blanket taxation.
Anonymous (May 4, 2008 @ 8:22pm):
The Highway Account and the Mass Transit Account are merely for Federal highways and do not rely exclusively on the gas taxes. The roads that you and I use a majority of the time are funded by the state's transportation budget which gets revenues through gas, license tabs, and vehicle sales taxes. The federal gas tax holiday would not affect the infrastructure of our nation to the degree that is being trumpeted by the people here. It would lower gas prices during the highest traveling rates of the year which would encourage people to travel to tourist attractions, increase spending, and bolster the economy.
It is a quick fix, but with long-term results.
Anonymous (May 4, 2008 @ 9:21pm):
Foriegn aid for Saudi Arabia? You are ignorant.
Saudi Arabia sends foriegn aid to the US to pervert our schools and promote Islamic law.
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