Friday, May 9, 2008

What about the gas-tax holiday?

There's been a lot of talk lately about the idea of lifting the 28cent/gal federal tax on motor fuel from Memorial Day to Labor Day, the traditional summer driving season. I have heard all about it from coworkers, presidential candidates, and unasked-for email forwards. I finally read some well spoken opinions (linked below) in the New York Times yesterday that spell it out.
Here's why a gas tax holiday would be a profoundly bad idea. Most people are grousing about the stellar oil company profits while we pay $3.50 and more per gallon. Why don't they lower the price and give us some relief? It's not fair they're making so much money! The fact of the matter is that the price of gasoline has little to do with price gouging by the oil companies and a lot to do with increasing global demand for oil, a weak-valued dollar, and uncertainty in the future of the oil supply. Removing the federal gas tax, in addition to removing the funding source for our roads and bridges, would spur increased demand in the USA, thus increasing the competition for the already tight supplies. It would be a matter of weeks before the price was right back up where it started, and now the oil companies would be pocketing the extra 28cents/gallon, instead of the federal transportation fund. In the opinion of most economic experts, it would backfire pretty badly just based on the economics. That's not to mention all of the expense associated with the accounting nightmare it would create for the federal government. It's just not even reasonable to think we could pull it all together in time for Memorial Day. Call by politicians for a gas-tax holiday sound a lot like political pandering.
So here's why it's not the end of the world if someone does manage to pull it off: first of all, it's a relatively harmless (only $5 billion or so shift from the transportation fund to oil company profits) way for politicians to convince people that they're trying to do something about a problem they really have little control over. Second, it could head off some much worse ides, like price controls or rationing. Last of all, it's just possible that he oil companies would use the windfall to try to increase production, which will only get more and more expensive from here on out.
I'm not convinced by the second argument so much, and generally, while I hate filling up for $60, I think that pain at the pump is pretty much what it takes to actually get people to change their habits. The indications are (I posted about this earlier) that people are starting to do this already, and for the first time in a long time, our gasoline consumption is going down. It's probably about time to put a damper on the American hyper-consumption lifestyle. Could we hope that people will begin to prioritize on deeper things in life than the next bigger plasma screen TV? Dare we hope for some spiritual opening?

No comments: