Gas taxes: Ads at the pump? A federal holiday?
Posted on April 29th, 2008 – 6:05 AMBy Roadguy
Nothing is certain but death and gas taxes — and endless debates about gas taxes. John McCain and Hillary Clinton have been calling for a “gas tax holiday” this summer — motorists wouldn’t have to pay the 18.4 cents a gallon that the federal government collects for transportation funding (a McCain story from earlier this month is here, Clinton story here). Closer to home, Minnesota Republicans are running ads criticizing the recent increase in the state gas tax (Strib story here), although gas stations with video screens at the pump have refused to run the ads (PiPress story here).
You can put in your two cents’ worth below.
(Speaking of oil, the New York Times takes this look at how demand is staying ahead of supply, and probably will for some time. $7 a gallon by 2012, anyone?)
36 Responses to "Gas taxes: Ads at the pump? A federal holiday?"
A gas tax holiday is a horrible idea. The best-case scenario is that I save a couple bucks per fill-up, enough for half a coffee at Starbucks. Much more likely, the price of gas will just go up to cover that amount, since lowering the price will drive up demand, leading to higher prices. Meanwhile, the federal government won’t be taking in any gas tax revenue, so we won’t be getting money for mildly important things like, oh, you know, fixing the bridge that fell down last year! Honestly, a gas tax holiday is pandering of the worst sort. If anything, we should raise the gas tax to raise money to pay off the decades of deferred maintenance and neglect evident in our transportation infrastructure.
Terrible, terrible idea. Decreasing the price by lowering the tax won’t save the average driver much all summer, if anything it will serve to increase demand and thus drive the price up more.
In turn, such a move would bankrupt the highway trust fund which is already teetering on insolvency. We need to raise the gas tax, not suspend it. But I doubt anyone has the political chutzpah to call for a solution that will actually, you know, help solve things.
A gas tax holiday is a recipe for more deficit spending. It is a bad idea that deserves to be criticized. Couple it with a ‘windfall profits tax’ and you will have even higher gas prices.
I’d say this is cynical politics, but I doubt that any of the three major candidates understand the real consequences
I agree that the gas tax holiday is a bad idea. As someone who is fiscally conservative, this is saying a lot.
The only thing the holiday does is to feed into the problem we have — too much demand for the limited supply. Why encourage the thing that put you in the predictament in the first place?
In fact, I’ve heard some credible arguments that we should dramatically increase gas taxes as a way of capturing some of the profits currently being shipped to Canada (where we receive most of our gas), Venezuela and the Middle East. Basically, you’d take over some of their artificially inflated quasi-monopoly profits. For those concerned about hurting people with the large new taxes, just reduce income taxes by the same amount, meaning it’s a net zero increase in taxes. A family wouldn’t be any worse off — only gasoline sellers would be.
Now, before any of you start claiming that I’m flopping on my previous stance against the gas tax, I disagree. My problem with the state gas tax is that it’s not necessary to tax Minnesotans more for the funding. Unlike a federal tax, Minnesotans pay more of the burden compared to the other states. Whereas a federal tax could be washed out and keep everyone equal, the Minnesota tax would just put our businesses at a competitive disadvantage.
Sounds like politics to me. Why don’t the candidates just say they will give away a free car to every vote instead!
Its definitely not a smart idea to have a “Gas Tax Holiday”. The shortfall of federal funds will only force the states and local governments to come up with a larger piece of the pie, thus not saving a dime.
If our state gas tax puts our businesses at a competitive disadvantage, then why did one of the most tax sensitive bodies in the state. the MN Chamber of Commerce back it? Maybe because our state used to be the leader in education, infrastructure and quality of life and the Chamber is finally realizing that nothing is free. I dislike paying taxes, but I dislike having the quality of life of a state like Mississippi worse…..
Sort of like the seven cents per gallon I saved yesterday at Holiday with my Cub Foods receipts… After all was said and done, I saved 84 cents on a $45 tank of gas!
No matter what any candidate’s position is, I bet this “holiday” does go into effect, what with it being an election year.
Prof. S.,
I know it seems counter-intuitive, but the fiscally prudent and conservative thing to do is to raise the gas tax, and to raise it substantially. Use the revenues to finance transportation investments (not just highways, but picking the best mode for each area) and alternative fuel/technology research (plug-in hybrids, electric cars, etc.).
That was more or less the conclusion of this group, appointed by the Republican congress:
http://www.transportationfortomorrow.org/
Not a lot of bleeding hearts in that group. The problem, of course, is that raising the gas tax is a political third rail (pardon the transit reference).
At least Obama has come out with a reasoned response to this gas tax holiday nonsense, but then again he did vote for such a holiday in Illinois as a state senator. However, such a reasonable and prudent stance doesn’t go very far when your opponents are fully pandering to the populace with extremely bad ideas.
Obama is 100% correct on this issue. Clinton at least tries to replace the revenues with the windfall profit tax. The problem is, any such tax will just be passed on to consumers, with a net effect of no savings to the consumer at all. And while McCain’s measure might result in a very brief respite for consumers, there wouldn’t really be much effect because it has already been determined that the market will bear prices where they are, tax or no tax. Thus, prices will rise to that level within days of the start of a gas-tax “holiday”.
So, our choices (based on presidential candidates) are to suck it up and deal with higher prices (Obama), to spend time and energy on a measure that will end up with us having to suck it up and deal with higher prices (Clinton), or to spend time and energy on a measure that will end up with us having to suck it up and deal with higher prices while having fewer resources for our ailing transportation system (McCain).
I get those receipts from Cub all the time. I throw them away even though I always buy gasoline from Holiday. I have a 20 gallon tank but I usually buy 15 gallons at a time so I’d save a buck using one of those coupons. If you could key in a code at the pump it might be one thing but it’s not worth it to have to trek inside to pay.
Hey,
What if we explored ANWR?
Then we could eliminate topics like this.
Hmmm.
Pandering at its worst. I’m glad people on this thread can see through it, but I’m not optimistic that the electorate is going to be as savvy.
Although some have labeled me a liberal because I supported the gas tax increase (mostly because I don’t support general fund revenues being used for highways, I prefer a user fee), I am 100% in agreement with Prof S when it comes to raising the gas tax while cutting the payroll tax, with no net increase.
Now, doing so would result in the gas tax actually being a “tax” since some of it would then go into the general fund, both on the state and local level. BUT, it would have benefits for the environment and for foreign policy (less dependence on mideast oil), which should result in less need for defense spending too.
Of course, it does so by changing our (bad) habits. And even though it’s not a tax increase, I’m sure some would cry foul and say it’s “social engineering”. I’m not saying that’s bad, but that’s where the pandering comes from. People see cheap gas as a fundamental right.
A year or so ago, the Strib published an article on the impact that the high cost of chicken was having on restaurant owners. One owner commented that the best cure for high prices was high prices. Sort of elegant in its simplicity. We’ve kept gas cheap at any cost for so long that it’s catching up with us.
ANWR might help make us less dependent on foreign oil, but it’s still a traded commodity and isn’t going to make that much of a difference in global supply, and therefore wouldn’t be a noticable difference in prices at the pump.
“cheap at any cost”… I like that! I’m going to have to start using that one.
Bad idea. As a fiscal conservitave, I say let the laws of supply and demand take care of business. It takes a long time for the demand curve to shift for gasoline (people don’t buy more fuel-efficient cars, industry can’t create alternative fuels overnight), but the trend has begun.
That being said, I would like to see more leadership from the federal government on this issue to help our country once and for all kick the oil habit. Incentives to jump-start the process would benefit us all. I’m tired of us literally burning so much money and helping fund both sides of the terror war.
Somewhat OT, there are two interesting technological developments worth watching: A company called Coskata announced last week a process to make ethanol via non-food sources at less than $1.00 a gallon (variable cost). Their process uses inputs such as plant stalks, tires, grass, woodchips, in lieu of food and consumes 3X less water than existing methods. Argonne labs has measured the net energy gain at 7X production costs. They built a pilot plant and plan on breaking ground on a large production plant later this year.
A second consortium called EESTOR claims a capacitor that has the potential to replace the ICE. They’ve teamed up with Zenn motors and plan to have an all electric vehicle available in 2009. I encourage you to check them out on the web. Note, both are still a big IF, but I think they have great potential. These represent the kinds of ventures I’d like to see our government support more.
Amazing. I can’t say I’m shocked it’s been proposed to have the gas tax go away for a little bit…it’s natural politics. Honestly though, what a moronic idea. Like others here have said, we should be going the opposite direction—we should be raising the gas tax every year more than we are now. If there is anything that economics has taught me is that the ONLY thing that will change our behavior is the effect on our pocketbooks (and on the oil companies). Support more gas tax, not less. It’s puts a major ding in my budget too, but it’s worth it. We need to change behavior.
Joe-
Economically either the carrot or stick could get the job done. I’m a proponent of the carrot, however. First, the tax will never get passed for political reasons.
Second, I’m also not concerned about prices collapsing and our country reverting back to old habits, simply because of the tremendous demand coming from China, India, and other developing economies. We will not see a repeat of the late 1980/1990s simply by reducing demand here.
Simple problem made complex by idiots trying to fight Capitalism. When we let the Oil Companies do their job we had low prices. Since we tax gas to death, force different formulas in each state, limit drilling, and prevent the building of new refineries, gas prices have shot up because of it. Get the Government OUT of the way and prices will stabilize. “We should be raising the gas tax every year..” Sounds like Joe should run for Chuck shumers seat. Lets attack the Oil companies and shrink everyones 401k and retirement and pension funds. That’ll teach them evil companies. Who do you think owns the Oil companies? We do! The stockholders. If you have a 401K - you do too! There are many countries in which you can go that hate Freedom…Russia, Cuba, China, North Korea etc. - why don’t you just move there instead of trying to ruin ours? Atleast make an effort to try to understand even the most basic principles of supply and demand before you start attacking these imaginary evils.
gas tax holiday? worst possible plan. what the feds need to do is stop their interminable quagmire in Iraq and start concentrating on AMERICAN issues for a while.
I’m voting for the president that promises me a gas tax rebate. My vote can be bought for the low low price of a lifetime of untaxed gas. Promise to eliminate the income tax & I’ll volunteer for their campaign. Refund all taxes collected, retroactively, and I’ll do whatever it takes to get them elected. Shoot, my kid’s gonna be smart. Let her pay for it all….
Keep raising the gas tax. It is the only way to get foolish Americans to conserve.
Are you people still buying gas? 
Bad idea. All it will do is raise the national debt and stimulate consumer demand to buy more gas. Alternative fuels, smaller cars, mass transit and changed behavior by the average American is drastically needed. I think the gas tax should be raised!
The proposed gas tax holiday and it’s crazed half-brother, the “economic stimulus rebate”, are like your crack dealer giving you a “two for one”. It’s always always always a bad deal.
Wow, I’m impressed with rational discussion here against horrid political pandering.
I’ve long supported the political unacceptable solution of a steep increase in the gasoline excise tax, like increasing $0.50/year for 5 years! If we had started that 10 years ago perhaps we’d be 10 steps closer to transitioning away from gasoline for fuel and we wouldn’t need to subsidize ethanol production. It could stand on its own (or not) without the tax.
It is still hard for me to simply reject the “I feel your pain” BS of being a political candidate. I’m a citizen who has lived 3 years without a car, so I DON’T feel your pain - those of you who must drive 20,000/year to survive.
If higher fuel taxes are political deadends, and we still need to lower consumption to match supply, then the only other solution I know is rationing - via fuel coupons. It was avoided in the 1970’s, but I have to think it’s the only politically defendable solution now.
Give every person with a driver’s license vouchers for say 25 gallons/month for fuel, and let the free market take over. Not having a car, I’ll auction my vouchers on EBAY, or be a true-blue environmentalist and throw them away! Anyone who needs more can pay for it, and poor people who can live with less fuel, can also auction their surpluses.
I can see how it would be hard to properly scale how many vouchers to give out, and perhaps some regions of the country have higher driving needs. Rural Montana residents would have a higher gasoline need than NYC.
Everything is messy, and nothing is fair, but if we don’t face the coming liquid fuel crisis now, it’ll be that much harder later, assuming it isn’t already too late to make any difference.
After reading Mapston’s comment, I’m looking forward even more to paying $7.00 a gallon (hopefully all taxes) to drive to my French-speaking, elite windsurfing weekend off Cape Cod this summer with John Kerry and Paul Krugman, at which we will all talk about how much us snooty folks hate freedom, America, and Nascar. I will personally sneer at anyone in a vehicle that gets less than 30 mpg…
I don’t feel too trusting of global oil supplies.
When the heck is the Chevy Volt gonna come out? I bet I’d get one of those.
Electric cars come with neat concept: By powering your car with electricity, the energy source for your car is abstracted and can be changed. So today your car may be nuclear-powered, and tomorrow it may be fusion-powered.
Update: The Chevy Volt may be coming out in 2010: Wikipedia source.
So, by Mr. Mapston’s logic, we should get “government out of the way and prices will stabilize”…. Does this include the billions of dollars per year that we spend on maintaining a military presence in the middle east to protect the supply on behalf of the oil companies?
SeanG writes
“Electric cars come with neat concept: By powering your car with electricity, the energy source for your car is abstracted and can be changed.”
I’m toying with the idea of putting solar panels on the roof & buying a neighborhood electric vehicle for commuting. In theory, for roughly the price of a high-mid range new car, I can eliminate fuel costs. Good idea or pie-in-the-sky?
I’m glad to see that the gas tax holiday is not gaining much traction here in Roadguy-land. I hope there are other sane fiscal folks around the country who don’t like this idea either.
Hillary’s suggestion is particularly fatuous. She says she’ll pay for the holiday with a windfall profits tax on big oil. Well, two problems with that. 1) 49 Senate votes (at least) will kill any big tax on big oil, and 2) much of big oil is now off-shore of the US and the reach of the IRS. Think BP or Royal Dutch Shell would show much U.S. based profit it Hill’s idea were enacted?
Oh, by the way, to whoever suggested ANWAR - it’ll only ever supply a few percentage points of total daily BBLS of oil on the world market, so even full development of that field would maybe drop world prices a few dollars per BBL.
We MAY just want to keep that oil in the ground for a few more decades so that we have SOMETHING more of a strategic reserve left when we, the Chinese and the Indians have driven through all the rest of the world supply. (Our cute little official Strategic Petroleum Reserve in the salt domes of Louisiana is really only there to make some back-up jet fuel for fighters and some diesel for a few Abrams tanks in case the end-times bunker-defense takes a long time).
Sorry for the cynicism. It’s been a bad day for prudence in government (read about our Dem’s giving tens of millions to private developers in Bloomington elsewhere @ Strib)
In light of Alex B.’s post, I should clarify my position as I do not know that it was entirely clear.
It’s not that I oppose capital or infrastructure improvements. Quite the contrary. I’m a big supporter of large projects (from stadiums to LRT). I do not think that this money needs to come from a new tax when there are plenty of old taxes being misallocated now.
Along those same lines, it’s refreshing to hear other people complain about the tax rebate. Imagine we spent that rebate on LRT lines. We could pretty much pay for the CC for the amount of money to pay for stimulus checks in the metro area. Do the math. Roughly 3-3.5 million people x’s $300 = $9MM-$1.05B. Instead, we’ll ship it overseas by way of federal debt and cheap electronics.
Couple of other points:
1.) Glad others see the value in major gas tax increases offset by other cuts.
2.) Electric cars are not necessarily better for the environment (and are worse in states w/o much nuclear or renewable power), since they shift CO2 production from the tailpipe to the power plant (which usually runs on coal).
3.) Remember that the advantage of high prices is that it encourages innovation to new sources. For example, scientists have already figured out how to make unlimited gas using airborn carbon for rougly $4.50/gal. (and less with the right technology). Such a plan would be carbon-neutral and avoid engine conversion costs.
Prof. S -
You say that electric cars are not necessarily better for the environment, as you are shifting from tailpipe to smokestack. While it is true that you are just shifting where the energy originates, it should be noted that it is far easier to mitigate the environmental impact of a single large source of pollutants than many small sources.
Additionally, as you tangentially elude to, there is the benefit of flexibility. By shifting to other less polluting energy sources like nuclear, solar, or wind, you can make a very large difference in environmental costs.
I see that the state’s municipal liquor stores are once again posting record profits.
http://www.startribune.com/local/18408024.html
Windfall profits tax, anyone?
