Mike Dunford is a graduate student in the Department of Zoology at the University of Hawaii, Manoa, where he studies evolution. He's also a contributer to 
Senator Hillary Clinton has apparently decided to join John McCain in calling for a "gas tax" holiday for the summer. Their plan would suspend the 18.4 cent per gallon tax on gas (and the 24.4 cent tax on diesel fuel) from Memorial Day to Labor Day, giving consumers a temporary break from the high cost of fuel. If, that is, the companies that sell the fuel don't decide to raise their prices and erase the relief.
In a Presidential campaign season that's been marked by more than its fair share of stupid ideas, this one's still a standout. Nothing says "responsible leadership" (or, for that matter, "intelligent campaigning") in times like this than proposing a measure that would:
- Potentially result in the loss of tens of thousands of jobs that are created by the federal highway projects that the gas tax pays for.
- Result in a massive spike in gas prices at the end of the summer, two months before election day.
- Create benefits for the average consumer only if the gas companies don't decide to raise their prices to collect some or all of the federal subsidy.
- Encourage consumers to buy more foreign oil this summer.
- Increase demand (and possibly well-head prices) during the summer.
- Provide a disproportionate share of the benefits to consumers who purchase massive, gas-guzzling SUVs.
Thank you, Senator Clinton, for once again reassuring me that backing Obama isn't as bad an idea as the alternative.
Comments
got a link to the Clinton piece of the story?
Posted by: andy | April 22, 2008 12:51 PM
I apparently forgot to insert the Wall Street Journal blogs link up at the top of the story (fixed now). I also just found a second article that makes it clearer that Senator Clinton actually said that she would support the gas tax holiday if the highway funds money could be made up through other means such as a windfall profits tax on the oil companies.
That does take care of at least reason #1, and possibly reason #2, on my list. Nevertheless, the gas tax holiday remains a bloody stupid idea (see, particularly, reasons 4-6).
Posted by: Mike Dunford | April 22, 2008 1:01 PM
Consider the supply and demand curves in this case. While the demand curve is more or less like you'd expect, the supply curve isn't. The refineries are maxed out, so the supply curve is essentially a vertical line. Since its the intersection of the curves that defines the price, lowering the tax rate doesn't change the supply curve, as its a vertical line. So the price will be unaffected, but the government revenue is down and oil company profits are up.
Posted by: malraux | April 22, 2008 1:27 PM
Re item #1, If you honestly think that the gas tax is actually getting spent on highway projects then you really need to take a look at how our government 'works the numbers'.
But yeah, the gas-tax holiday is about as dumb an idea as they come. Still it's a fairly safe idea for the candidates to be in favour of since there's zero possibility of it actually happening.
Unless the chimp picks up on it ... uh oh !
Posted by: NoAstronomer | April 22, 2008 1:32 PM
It seems completely backwards! You want to be reducing fuel consumption; or more accurately, reducing emissions (including greenhouse gases). As such, a good thing to do would be encourge the recycling of older cars for more efficient transport; be it simply more efficient cars, decent public transport, bicycling, and so on. I do not see how a petrol tax holiday would do any of that? Petrol tax may or may not be part of a package motivating the needed changes; but a petrol tax holiday seems very very unlikely to assist motiviating people.
Reasons 4, 5, and 6 may reduce to this point? They seem to be essentially opposite of what the planet and its people need.
Posted by: blf | April 22, 2008 2:32 PM
"Potentially result in the loss of tens of thousands of jobs that are created by the federal highway projects that the gas tax pays for."
Come on! You don't think that the gas tax is actually spent on the things that the law requires it to be spent on? It is embezzled into other pet projects just like the Social Security Trust Fund.
"the federal subsidy."
Again you were sucked in. There is no federal subsidy. The politicians believe that any money belonging to anyone that they are not taking in as taxes is a "loophole". Actually oil companies are treated more poorly than the average business when it comes to taxes. For one example they are the only business that I know of that can't directly deduct depreciation. Farmers are even allowed to deduct "depreciation" of their land based on the bizarre assumption that the number of crops that can be grown on a piece of land is finite.
"Encourage consumers to buy more foreign oil this summer."
"Provide a disproportionate share of the benefits to consumers who purchase massive, gas-guzzling SUVs."
You right on this one. The real problem is excessive demand. The demand for oil from China and India is growing at an extraordinary rate and Russian production seems to be peaking. The amount of extra oil that is used in the U.S. for SUVs over what would be required for ordinary cars is greater than the amount that we import from Saudi Arabia. (Of course we are not one of the Saudi's biggest customers.)
"windfall profits tax on the oil companies"
First someone would have to define what exactly "windfall profits" are. The last time the government claimed to have a "windfall profits tax" it was an excise tax based only on the number of barrels produced. Naturally this was passed on to the consumers.
When it comes to taxes, perhaps if the public doesn't like them they should stop voting for them. A few years ago the voters decided that the gas tax should go up 5c a gallon. On the day that this tax became effective, gas went up 5c. People shouted "conspiracy!". The mean old oil companies all raised their prices at the same time!
Another problem is that there have been no new refineries built in decades. This is not the fault of the oil companies. It is the fault of the NIMBY group (not in my back yard) who has stopped every attempt to build one.
It isn't a matter of when the government will solve the problem. It is a matter of when the government will stop being the problem. As an example, Canada has the largest oil reserves in the world, not Saudi Arabia. Recently congress moved to ban the importation of oil produced from the Athabasca oil sands because producing it causes slightly more pollution than producing from conventional fields. Of course if the shipping of conventionally produced oil from the Middle East is included, producing oil from the Canadian tar sands actually produces less pollution.
The energy problem is quite complex. The government has found that it is easier to distract the sheep by presenting various villains and whipping boys rather than trying to actually solve the problem.
Remember these people are the ones who mandated adding ethanol produced from corn to your fuel, increasing pollution, reducing engine life, raising the price of food world wide, and ignoring the fact that corn is one of the least efficient sources of ethanol on a per acre basis. The importation of ethanol produced from beets, the most efficient source, has been banned although it costs less than half as much. The beet farmers do not vote early in Iowa.
Posted by: Bill Carter | April 22, 2008 4:16 PM