Posted on 04/30/2008 8:17:37 AM PDT by Deek1969
A gas tax holiday proposed by U.S. presidential hopefuls John McCain and Hillary Clinton is viewed as a bad idea by many economists and has drawn unexpected support for Clinton rival Barack Obama, who also is opposed.
"Score one for Obama," wrote Greg Mankiw, a former chairman of President George W. Bush's Council of Economic Advisers. "In light of the side effects associated with driving ... gasoline taxes should be higher than they are, not lower."
Republican McCain and Democrat Clinton, who is battling Obama for their party's nomination, both want to suspend the 18.4-cents-per-gallon federal gas tax during the peak summer driving months to ease the pain of soaring gas prices. The tax is used to fund the Highway Trust Fund that builds and maintains roads and bridges.
Economists said that since refineries cannot increase their supply of gasoline in the space of a few summer months, lower prices will just boost demand and the benefits will flow to oil companies, not consumers.
(Excerpt) Read more at news.yahoo.com ...
A higher rate of speed does not always mean a lower fuel mileage rating. It depends on the specific speed and vehicle. So just because someone is driving faster than you doesn't mean they are wasting fuel (or that they are idiots).
The reason that oil profits are so high is because they have nowhere to reinvest the money. They can’t build new pipelines, they can’t drill, etc. So they diperse to their shareholders, many of whom are 401k employees.
If the tax is reduced, demand will raise fuel prices back to these levels. So the tax reduction must be accompanied by a repeal of the regulations that are hamstringing production.
More available oil will reduce the price of oil. Econ 101
Have you told Chuck Schumer that?
It would appear that in 8yrs, he has learned something and modified his thinking.
While I’m of course feeling the pain as much as everyone else is the analysis in this article is drop dead correct; removing the gas taxes would only ratchet up demand which would cause the price to rise to an amount close to the amount of the offset. The only answer to the gas prices is to drastically reduce demand in the U.S. That can probably only be accomplished through a combination of reducing the speed limits to 55 MPH as Carter did (which Bush won’t do because he’s not capable of providing any true leadership) and by gas rationing as is sometimes necessary in a time of war. I frankly don’t expect to see either measure taken until after the election.
"I think high gas taxes are a regressive tax...
The people who drive the furthest are the lowest
income Americans. It is incredibly regressive.
Where's the fairness there?"--John McCain during CNBC interview with John Harwood
We'd see a small effect for a short time, and then the price would go back up to the market price, which is what consumers are willing to pay for a gallon of gas.
When the price gets too high, gasoline inventories go up, and they drop prices. When the price is lower, they can't keep up with demand, so they raise prices. That's how the market works.
Reducing the cost of gasoline doesn't in itself have a lot of effect on the price, except for a short time period.
The cut in gas taxes would end up as profits for the oil companies, and we would still have to pay for the costs of maintaining roads, but it would be done through a more progressive tax on income rather than a use tax.
Oil companies would get a windfall generated by effectively lowering their costs, and we would not only pay the high price for gasoline, but we'd have to make up for the lost taxes in another way as well.
A temporary gas tax cut for the summer would screw taxpayers in the end.
I’m also all for keeping money out of the hands of the Saudis, Venezuela, Iran and Russia. I think real patriots should be reducing consumption and developing alternatives. With freedom comes responsibility. I do not see this emphasized enough by Freepers.
The gasoline tax also funds roads: do we want to pay tolls every time we leave our driveways? Or are we going to borrow more from the Chinese to repair our roads, or just let potholes take years off our cars? Think, people!
I use less than a gal./day.
27mpg baby! AND YES, DOING THE SPEED LIMIT USES WAY LESS GAS. I’ve proved it with my own car.
Driving slower in fact does produce better gas mileage. When a crew chief in NASCAR wants his driver to save some gas, how do you think that driver goes about it when he is leading a race? And have you seen how some speed and weave in and out of traffic? They would indeed be idiots when they are putting others in danger.
The roads still need to be maintained. They aren't suggesting a spending cut, they are suggesting temporarily cutting the gas tax.
They'll end up either raising taxes elsewhere or borrowing to cover the costs.
At the same time, most of the "tax cut" will end up going to the oil companies as profits. Gasoline prices are set by supply and demand, and the oil companies can't magically create more refinery capacity.
When the taxes are removed, the price of gas will dip, but as soon as summer demand for gas hits, and demand starts outstripping supply, the price of oil is going to go up until demand drops back down to what they are able to supply.
This isn't going to result in significantly lower prices for consumers for long because the supply is capped. The price will be set based on demand, not based on them getting an extra 18.4 cents of what you pay at the pump.
“Slow down people and do the speed limit. Your wallet will thank you.”
I usually drive 5 under AND keep the heat/AC all that stuff OFF.....I’ve dramatically improved my gas mileage by doing that.
Must you really spam every thread with this?
This is an inaccurate portrayal of how market forces work. Taxes are just another cost, much like production costs. So if I reduce production costs to zero, people would still be paying $3.50 a gallon? No, producers would make more profit on volume by reducing cost, so they would act in their best interest. So would consumers, buying more within the limits of their budget, so demand would increase-- the price would not drop by the full amount of the removed cost, but it wouldn't return to $3.50 unless demand was insatiable. Current price reflects the equilibrium. But why settle for my opinion: Fact-- when Illinois gave a "tax vacation" for SIX MONTHS in 2000 on their 5% tax, the price dropped initially by close to 5% then reached an equilibrium at a 3% reduction (due to increased demand)where it remained for the remainder of the period. See, it does work.
Actually, it is an excellent idea. It won’t help much, if any, but if we can get politicians talking about cutting taxes to help people have more money in their own lives, that is always a good thing for conservatives and a loser for democrats, since they don’t want any tax cuts (unless they are mere redistribution of wealth or welfare checks).
I get 2-3 MPG better at 65 than at 70. Since I drive 130 miles per day, this is significant to me.
I respectively disagree. With that logic, no taxes would be cut.
How about the government examines its spending just as most of us are doing and come up with ways to cut spending? Why do we, the little people, have to pore over grocery expenses and end up eating more dried beans and pasta, yet there's no incentive for government to get by with less.
The notion that taxes can be and should be properly (and legally) used to control behavior is like the magic wand of politicians, who all start "serving the citizens" as poor citizens themselves, but miraculously become millionaires when they leave office...
Your disagreement is posited on the Road and Infrastructure expenditures being unnecessary/wasteful. If that is true, I agree, let’s cut taxes and expenditures. If not true then these projects must go forward and be funded some way, all of which are ultimately by Taxpayers or Users (Who are, for the most part) one in the same.
Unfortunately, I see an INCREASED requirement for this type of expenditure, above what is already being spent. Cutting taxes that funds these requirements will only delay them, at future higher costs in terms of increased degradation and lowered efficiency of use, or require borrowing, again, at future higher costs.
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