Who would refuse a tax break and lower gas prices?
Maybe ABC News. The April 30 “World News with Charles Gibson” could not find a single reason to support a “holiday” on the federal gas tax from Memorial Day to Labor Day, even though it has support from the Republican and one of the Democratic candidates for president.
“The idea is to cut taxes and gas prices during in the summer vacation months, when demand is highest,” ABC correspondent David Wright said. “Great politics, but apparently terrible economics.”
Both Sens. John McCain (R-Ariz.) and Hillary Clinton (D-N.Y.) support the measure. The two differ, however, on how to raise comparable tax revenue. McCain advocates less spending, [1]but Clinton has said she wants to offset it with a “windfall profits tax” on oil companies. However, Wright reported it would just cause more demand, which he implied was bad – even if it means any amount of relief for the consumer.
“Economists have two basic concerns. First, the savings would be minimal. The average motorist would pocket $30 for the entire summer,” Wright said. “The more fundamental concern, if you take away the gas tax, demand will spike. More people out on the roads, tapping into a finite supply of gas. Prices would likely go up.”
Wright was downplaying what would amount to an 18-cent drop (the federal tax amount) in the price of a gallon of gas. Ironically, when some predicted gas price increases of as much as 23 cents per gallon, the media were alarmed – [2]like CNN’s Ali Velshi on March 20.
Still another reason to oppose it, according to Wright, is that a tax break would violate the talking points of environmental alarmists.
“Finally, cutting the gas tax actually goes against the long-term energy goals all three candidates have embraced, cutting pollution and reducing our dependence on foreign oil,” Wright said. “If more people are out on the roads, those problems will only get worse.”
The segment trotted out an economist from the left-leaning Urban Institute, who condemned the idea.
“You would be hard-pressed to find any economist who would say that this is a good idea,” Len Burman of the Urban Institute said.
However, the editorial board of Investor’s Business Daily didn’t seem to have any problem calling this proposal “a good idea.” An editorial [3]in the April 15 IBD found some merit in the proposal. Although it isn’t a permanent solution, it said, it is a step in the right direction.
“The tax holiday is a slam dunk,” the editorial said. “Yes, the government would lose $10 billion in revenue, as the Associated Press took pains to point out. But that's exactly the point. That money would instead be going into the pockets of the very people who need it most — those pinched by the soaring cost of oil, now at $113 a barrel. If Congress needs the $10 billion, let it cut pork-barrel spending.”