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Thursday, May 1, 2008

The Insanity of the Gas Tax "Holiday"

That's the only word to describe the Clinton-McCain proposal to "temporarily" suspend the gas tax.

First of all, it's almost guaranteed to do absolutely nothing to lower gas prices

Cuts in gas taxes would not lower gas prices because the supply of gasoline is close to fixed -- the oil industry is already operating its refineries at near maximum capacity (or so they claim). As we teach our econ students, if the supply is fixed, then the price is determined on the demand side. This means that, if the industry produces about 400 million gallons of gas per day, the price will continually adjust to the point where all consumers put together purchase about 400 million gallons of gas per day. Therefore, if the gas tax is reduced or eliminated, as McCain has proposed, the price consumers pay will stay the same, but more money will go to the oil industry.



And even if that wasn't true, and it would save people $30 a year, the rationales Senator Clinton and Senator McCain are using for this proposal are still insane.

Campaigning in Cleveland, Mr. McCain suggested that low-income families were hit hardest by the cost of fuel because they typically drove longer distances to work in older-model automobiles.

“Why not give them a little break?” he said. “Instead, with all due respect to those who travel around in chauffeured limousines, you’d think that we are destroying the economy of America.” Mr. McCain acknowledged that the proposed gas-tax holiday did not take on bigger problems.


Of course, the poor in Cleveland tend to use the Greater Cleveland Regional Transit Authority to get around.

The heavy rail and light rail uses no foreign oil at all, as it's electric (it's likely powered by a coal-fired power plant, which has it's own problems but at least we're a net exporter of that particular resource)

The bus uses foreign oil, but significantly less per passenger mile than an automobile.

The sane goal is to get more people to ride mass transit, so that the federal government doesn't have to subsidize operational expenses like it did in Cleveland as of 2006 (while all transit systems have to be subsidized because you want public transit to be available at all times, not just peak times, and you want to keep it affordable even for the very poor, Cleveland's transit system is underutilized, and so fares only cover 18% of operating expenses [most of operating expenses are salaries, wages and benefits, fuel-related costs are a pretty small percentage]; in Chicago, fares cover 43% of operating expenses) and can instead spend more on subsidizing capital expenses (keeping the system safe and expanding it and other systems).

By the way, the funds for subsidizing mass transit?

They come from that gas tax McCain and Clinton want to repeal.

Federal purse strings. Part of the squeeze stems from the failure of federal funding to keep pace with the relative explosion in the number of transit systems under construction. Even as more cities build or expand their systems and ridership hits a 50-year high, the amount of federal funding has remained constant. And now, the federal transportation trust fund, paid for largely through an 18.4-cent-per-gallon gas tax, is scheduled to run out of money next year. The federal fund will have a $3 billion surplus this year, which will become a $3.9 billion deficit by 2009. When Congress proposed raising the gas tax to close the expected gap, the White House called for cuts in spending. The tax has not been raised since 1993.



The Congressional proposal for raising the gas tax was not a bunch of "crazy far-left Democrats," by the way.

This was a bi-partisan commission's recommendation

And that commission was not "bipartisan" in the sense of having Democrats, Joe Lieberman [who's decent on transit issues] and Bernie Sanders.

It included:

1. Bush Transportation Secretary Mary Peters (Republican)
2. Jim Doyle's Secretary of Transportation and former Teamster Frank Frank Busalacchi (Democrat)
3. Bush appointee and former RNC Deputy Chairwoman Maria Cino (Republican)
4. Rick Geddes, Hoover Institution Fellow (Republican)
5. Steve Heminger, Pelosi choice for commission (Democrat)
6. Frank McArdle, Hillary Clinton choice (Democrat)
7. Steve Odland, Office Depot CEO & business mogul (Republican)
8. Patrick Quinn, Bill Frist choice (Republican)
9. Matthew K. Rose, Railroad Baron (Republican)
10. Jack Schenendorf, Bush transition team member (Republican)
11. Tom Skancke, chosen by Harry Reid (Democrat [kind of])
12. The very far-right Paul Weyrich, co-founder of the Heritage Foundation (Republican)

So that's 8 Republicans and 4 Democrats.

“I’m a conservative Republican,” said Weyrich, a panel member. “The orthodoxy in the conservative movement is don’t raise any tax. But in this particular instance, I don’t see any alternative.”


Granted, Paul Weyrich is actually pretty good on transportation issues (plus he already said he wouldn't vote for McCain vs. Hillary, although he may have changed his mind, especially after this, his pet issue).

And there are other right-leaning pressure groups opposed to this, including the National Association of Manufacturers (probably) and construction companies (definitely).

And there is bipartisan opposition to such a holiday, even in rural states (John Thune and Tom Harkin and both said to oppose it in the NYTimes article).

At any rate, it is utterly insane.

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