Thursday, May 1, 2008

Gas Wars: Will $3.81 A Gallon Be Any Better For The Economy?

Besides the the gas tax debate going on here between Governor Rounds and everyone else that seeks to collect more taxes (or according to Rounds, the proper taxes) on the latest trend in the ethanol debacle, blender pumps, the candidates for President are getting involved in a gas tax debate of their own.

The John McCain approved "gas tax holiday" also being promoted by Hillary Clinton in between unsuccessful attempts to pump her own gas would eliminate the 18.4 cent a gallon federal gas tax for the summer. The idea of course being that the tax savings would be good for the economy by making gas cheaper. The problem for McCain and Clinton, besides the fact she was surprised when questioned that it would save the average driver only about $30, is that economists and many of their colleagues are panning the idea.
Leonard Burman, director of the Tax Policy Center of the Urban Institute and the Brookings Institution, said the laws of the market argue against a tax suspension. "Every summer, the refiners are running full out. If the price fell, people would want to drive more and there would be shortages," he said. "It's a basic economic principle that if the supply is fixed, the price is going to be determined by demand."

Joining in the criticism was House Majority Leader Steny H. Hoyer (D-Md.), who said that the Democratic leadership of Congress has no intention of pursuing the summer tax suspension that Clinton touted. The move "would not be positive," he said. "The oil companies would just raise their prices."

Also throw in the long term effects that are near and dear to those of us that have to drive the less than pretty South Dakota interstate system.
The tax suspension would, as a result, cut into the highway trust fund that the tax supports, a loss of about $9 billion over the summer.

So taking into account the fact that this tax holiday does nothing to fix the root cause of the ever rising gas prices, and considering that gas is predicted to hit at least $4 a gallon this summer, will the resulting $3.81 a gallon make much of a difference?

At least you'll have those tax rebate checks to put towards your gas purchases by then...if that is you haven't already spent it on food, rent, or electricity.

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