Black Shards Press – Electronic Gumbo is Our Specialty

In Favor of Keeping Gas Tax

30.04.2008 (12:59 pm) – Filed under: Energy,Finance,Politics,Taxation ::

Federal gas taxes help support America’s transportation system, one in which roadways all over the nation are being repaired and upgraded after a period of significant neglect.  It’s unpleasant to pay the $0.18 extra per gallon, yet there are worse things.

Thomas Friedman has this to say about the unholy alliance of McCain & Clinton that embraces the foolhardy notion of removing the federal excise tax on gasoline for this summer’s rush to the pumps:

It is great to see that we finally have some national unity on energy policy. Unfortunately, the unifying idea is so ridiculous, so unworthy of the people aspiring to lead our nation, it takes your breath away.

Hillary Clinton has decided to line up with John McCain in pushing to suspend the federal excise tax on gasoline, 18.4 cents a gallon, for this summer’s travel season. This is not an energy policy. This is money laundering: we borrow money from China and ship it to Saudi Arabia and take a little cut for ourselves as it goes through our gas tanks. What a way to build our country.

When the summer is over, we will have increased our debt to China, increased our transfer of wealth to Saudi Arabia and increased our contribution to global warming for our kids to inherit.

Friedman is a day behind Paul Krugman, who partially identified the problem with this "plan" yesterday:

Why doesn’t cutting the gas tax this summer make sense? It’s Econ 101 tax incidence theory: if the supply of a good is more or less unresponsive to the price, the price to consumers will always rise until the quantity demanded falls to match the quantity supplied. Cut taxes, and all that happens is that the pretax price rises by the same amount. The McCain gas tax plan is a giveaway to oil companies, disguised as a gift to consumers.

But as Friedman says, the problem isn’t that oil companies might raise prices to market levels and hence make more money – it’s the fact that the federal government’s already bloated budget is hundreds of BILLIONS of dollars out of balance and this proposal, kind as it might seem to drivers, can only exacerbate the fiscal mess that’s been created by the Bush administration.

There’s another aspect to the issue as well.  Friedman again:

…here’s what’s scary: our problem is so much worse than you think. We have no energy strategy. If you are going to use tax policy to shape energy strategy then you want to raise taxes on the things you want to discourage — gasoline consumption and gas-guzzling cars — and you want to lower taxes on the things you want to encourage — new, renewable energy technologies. We are doing just the opposite.

The truth is that a sustained period of high gas prices will – not would, but will – be a good thing for America because higher prices encourage investment in other forms of energy that are not as likely to be controlled by people who actively detest everything America stands for.

Friedman again:

The McCain-Clinton gas holiday proposal is a perfect example of what energy expert Peter Schwartz of Global Business Network describes as the true American energy policy today: “Maximize demand, minimize supply and buy the rest from the people who hate us the most.”

Sounds like a real winner of a policy, doesn’t it?

Of the candidates still in the running for the presidency, only Barack Obama has the sense to see that suspending the gas tax is a temporary, feel-good, "vote-for-me-because-I’m-nice" position that hurts people in the long run.

Good for him.

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