On April 15, McCain proposed a federal gas tax holiday from Memorial to Labor Day, suspending the 18.4 cent levy at the pump to provide relief from high gas prices. Now, it's become an interesting -- and rare -- subject of some substantive dispute on the campaign trail.
It would save motorists on average about $30, according to Congressional studies. But there are a couple of key problems. First, the tax services the Highway Trust Fund, so a holiday would blow a $7 or $8 billion hole in highway construction and potentially cost jobs. Second, it wouldn't really work, because by reducing price it would increase consumption which would quickly push prices back up. From USA Today:
"Len Burman of the non-partisan Urban Institute said the money won't necessarily go back to consumers. Refineries already are running high to meet summertime gasoline needs, Burman said, so if demand for gas increases, so will prices. He said that means 'a huge windfall for refiners,' not consumers."
Obama opposed McCain's idea, arguing for more fundamental reform in energy markets. Hillary had also opposed the idea back in 2000, when she was running for Senate in NY, high gas prices were the responsibility of the Clinton administration, and Rick Lazio was proposing a gas tax holiday:
To Newsday: "A bad deal for New York and a potential bonanza for the oil companies." At a debate: "[O]ne of my fundamental disagreements during this campaign with my opponent was when he called for the repeal of the gas tax. Now, the gas tax is one of those few taxes that New York actually gets more money from Washington than we send."
That, however, was a year for pro-NY panders. This is a year for national panders, so a week ago Hillary said in an interview on CNN that she would "consider a gas-tax holiday, if we could make up the lost revenues from the Highway Trust Fund." So, she was rhetorically postioned in favor of the pandering side of McCain's proposal, but against its highway construction downside.
Her next step: She proposed a windfall profits tax on oil companies to fund the tax holiday -- theoretically filling the hole in the Highway Trust Fund, though not solving the dilemma of actually lowering prices. And, theoretical here is very theoretical -- it assumes that, by summer, Congress will for the first time since the Carter administration impose a windfall profits tax taking $7 billion from the oil companies, with consequent risks of discouraging domestic exploration and production, reducing supply and raising prices long term. See a Congressional Research Service report here and a Chicago Tribune explainer here long-term.
If funding a gas tax holiday with a windfall profits tax is such a great idea, why didn't she propose it in 2000, instead of just bashing Lazio? Maybe she just didn't care about saving a few bucks for working New Yorkers the way she cares about working Indianans. But why get technical. It's useful now because it lets Hillary make a 30-second ad, and draw a contrast with the heartless Obama, who doesn't care about the little people.
It should be noted that Obama, as an Illinois legislator, took ambiguous positions on a gas tax holiday, and that -- as a presidential contender -- he, like Hillary, has expressed support for a windfall profits tax on oil companies, though not as part of a gas tax holiday plan. So, assuming that both a gas tax holiday and a windfall profits tax are bad ideas that won't really work and won't fly, here's what we end up with:
McCain supports one bad idea that won't work. Obama supports a different bad idea that won't work. Clinton, proving her presidential mettle, supports deploying both bad ideas to not work as part of a package.
They're really all talking about nothing, except they want to be president.
Comments (1)
amen