Thursday, May 08, 2008

Gas Tax Holiday: the $30 bribe

Okay, so you've been hearing the plans from Senators Clinton and McCain about how they want to suspend federal gas taxes during the summer, because that's when gas prices tend to go up. This is supposed to help Americans who are hard-hit by rising gas prices, which are approaching $4.00 a gallon right now. This is supposed to ease our lives. Barack Obama has called this a gimmick, and rightly so. There are many reasons as to why this "Gas Tax Holiday" should immediately appear to be only so much gas, and you don't even need a degree in macroeconomics to understand them (but I'm sure it wouldn't hurt.) —It's a small slice of pie. The federal portion of the gas tax in the United States is 18¢ per gallon. Assuming you drive the same distance that the average American drives in a summer, this should net you about $30.00 by August. Wow! That's almost one whole free tank of gas! Why doesn't the government just write all of us $30.00 checks every three months and get the economy humming again? —Upkeep. The gas tax nets the government about $10 billion a year, and this money is earmarked for road and bridge maintenance. If the roads are in lousier shape, this will be harder on our cars. Collapsing bridges will be harder still. —Supply and demand. A lower price increases demand, which means that if gas is cheaper, people will use more of it, thus shrinking supplies and driving the price up. 18¢ isn't enough to make that much of a difference, admittedly, but it pulls the essential Jenga block out from the bottom of this already flimsy argument. —What the market will bear. Petroleum companies, understanding what markets do, will just raise the price by 18¢, eliminating any benefit that this "Gas Tax Holiday" might bring about. That will just mean bigger profits for petroleum companies. And Hillary Clinton's "windfall profits" tax on petroleum companies, while a good idea by itself, wouldn't make up the difference here. Remember that something like much more than half of all petroleum is pumped out of the ground by government-owned petroleum companies—foreign governments. This would punish American companies while rewarding foreign governments—all while starving America's infrastructure! Brilliant! It's all too rare to hear a politician speak plainly and rationally in the face of feel-good proposals that only serve the would-be elected official who proposes them. It does my heart good to see Barack Obama shouting this one down. The government can keep my thirty bucks this summer and go fix a bridge.

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At Friday, May 9, 2008 at 5:32:00 AM EDT, Anonymous Anonymous said...

Kurt, I think you might be underestimating the savings of the gas tax holiday if you only put it at $30.00.
I mean, what if you are driving a Hummer or a huge pickup truck? That 18 cents a gallon adds up when the tank holds 32 gallons and you are getting 9-10 mpg and have an hour commute to and from the burbs.
Hybrids and little 1.8 litre imports are for liberal wankers who don't recognize America's right to cheap foreign oil. L

At Friday, May 9, 2008 at 7:01:00 AM EDT, Blogger Kurt Kaletka said...

Well, my $30 figure was an average. Personally, my Chrysler gets decent gas mileage, and since I drive 28 miles a day round trip for my commute, I'd wind up saving less than $30.

But if you've got a 32-gallon Hummer tank, and if you knock 18¢ per gallon off, you'll wind up saving $5.76 per fillup. So if you're paying $3.61 per gallon like I did the other day, the post-discount rate would cost you $109.76 instead of $115.52. Fill up once a week for the twelve weeks of the proposed "Gas Tax Holiday" and you save $69.12—slightly more than half what it costs to fill your Hummer up. Twice a week would net you $138.24 for the whole summer. While I wouldn't mind getting an extra hundred bucks or so, that's not really going to help me out that much—nor would it help anyone—especially if it means extra wear and tear on our cars due to deteriorating road conditions!

Our friend in the Hummer is an extreme example, I realize. Anyone who would use a Hummer to commute daily probably has money to burn (and they're burning it.) The bottom line is that the "savings" with the Gas Tax Bribe really don't save anyone a significant amount.

Regardless, I expect a coalition of Hummer dealers to petition for an amendment to the Constitution guaranteeing Americans cheap foreign oil!

At Monday, May 26, 2008 at 7:52:00 PM EDT, Anonymous Anonymous said...

We need an update Kurt so I can add something of value to the "watercooler political talk!"

At Monday, June 30, 2008 at 2:46:00 PM EDT, Anonymous Anonymous said...

Hi Kurt, I just wanted to add that I really enjoy your political blog and am curious to hear your latest opinion on things. No pressure though.

At Monday, August 25, 2008 at 1:42:00 PM EDT, Anonymous Anonymous said...

What are your thoughts on Obama picking Biden?

At Sunday, September 7, 2008 at 10:27:00 PM EDT, Blogger TT said...

Im def curious to hear your take now on everything going on with the election. My middle school self contained emotionally disturbed students are very invovled, so perhaps you can shed light on issues and help me present it in a way that will keep their interest and inform them :-)



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