Gas Tax Holiday…A Holiday From Logic
Who doesn’t enjoy a holiday? Whether it’s time away from work or, in the case of a proposed summer gas tax holiday, time away from federal gas taxes, just the word ‘holiday’ has a positive connotation. Happy times. A break from the norm. And lately the norm at the gas pumps has been anger and frustration over rising prices. So the idea of a summer break from the 18.4 cent per gallon federal gas tax is now being tossed around by presidential candidates John McCain and Hillary Clinton, while Barack Obama opposes it.
The arguments against suspending the gas tax are multiple, but the best argument may be simple supply and demand. A temporary price cut encourages increased buying, in the same way you look for deals at the supermarket and stock up on products when they are cheapest. When gas prices are temporarily lowered, interest/demand will increase. But unlike your favorite bag of potato chips, gasoline is in limited supply. So as demand increases and supply stays the same, the price of gas increases. So much for the price cut. The real effect is the gas tax money that pays for road construction and improvements goes uncollected. The extra change that you keep in your pocket from the temporary price cuts will clang when you start hitting potholes in the road. Environmentalists also cite global warming as another reason not to lower prices.
The argument for suspending the gas tax is singular. One reason: gas is expensive, and it feels good to lower the price. A cynical person could argue that a secondary reason to support the gas tax holiday is to score political points. But the pain of motorists is cited as the main reason for the idea. We need a break. We need happy times. A discount of 18.4 cents per gallon will save our summer vacations. The savings on a 20-gallon tank of gasoline would be $3.68. At least in theory, until the realities of supply and demand take effect. So logic tells us that we will have higher prices and those road construction projects that slow down your drive may take even longer to finish if the overtime budget is cut or the number of crews reduced.
It’s easier to be convinced to support the gas tax holiday if that $3.68 savings means a great deal to your family. So let me invite your best case for or against the gas tax holiday...frame the issue on your terms, as it impacts your life. Do you see the suggested tax break as good policy? Do you see the politicians who support it as advocates for the little guy? And what will you do with your $3.68 per tank, assuming economists are misguided about supply and demand.
