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Editorial: Gas tax 'holiday' nonsense
Published 12:00 am PDT Friday, May 2, 2008
Story appeared in EDITORIALS section, Page B6
Hillary Clinton and Barack Obama have been debating the gas tax as they campaign this week in Indiana and North Carolina. The two candidates' different takes on this issues highlights much about their approaches to politics and policy.
Clinton, like Republican John McCain, has endorsed a "gas tax holiday" for the summer. She wants to suspend the 18.4-cents-per-gallon federal levy for three months. Obama opposes the idea – with good reason.
The gas tax is a user fee. The revenue it raises goes for construction and maintenance of roads and bridges and to support public transit, all of which make the highways safer and easier to navigate. If anything, the tax is not high enough. It continually loses ground to inflation and raises less money per mile of pavement pounded as motorists drive more fuel-efficient cars.
Clinton has proposed a "windfall profits tax" on oil companies to replace the money her proposal would take from the nation's infrastructure budget. The merits of that tax should be fully debated elsewhere. But the irony here is that a gas tax holiday could increase profits for the very firms Clinton says are making too much money now.
Here's why: The gasoline supply for the summer is pretty well fixed. If the price suddenly drops by 18 cents a gallon, however, motorists who have been cutting back on their driving will suddenly drive more, using more gas. That increase in demand will push the price back up again, perhaps to the same level it was before the gas tax was suspended.
And as gas prices float upward, revenue that would have been going for infrastructure would now be pure profit for the oil industry. The only way to avoid this scenario would be to freeze gas prices at the lower level, but that would almost certainly lead to shortages.
Obama understands this, which is why he has refused to pander on an issue over which it is easy to score cheap political points. Clinton and McCain could not resist that temptation, even though they surely know better. Shame on them.
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