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Upside, Downside on Gas Tax Relief | Oil Watchdog

Press Release

Upside, Downside on Gas Tax Relief


Tue, Apr 15, 2008 at 3:56 pm

    Upside, Downside on Gas Tax Relief

    4-15-08 by dugan



    The big upside of Sen. John McCain’s proposal
    today to suspend the 18.4-cent federal gasoline tax through this summer
    is that it’s simple and popular: Get rid of a tax and reduce the price
    of gasoline immediately. Those aren’t little points, with the prices of
    oil, gasoline, diesel, natural gas and home heating oil hitting new records too fast to keep track of and stoking painful inflation. But it’s the second level of the idea where trouble starts.

    •  The gasoline tax and the 24.4-cent per gallon diesel tax are the
      primary source of federal funds to maintain federal highways, bridges
      and tunnels, which are in bad shape and getting worse. Given the
      leaping federal deficit, the money isn’t going to come from "somewhere
    •  Suspending the tax won’t stop the rise in the underlying price,
      and will make it politically easier for oil companies and independent
      refiners to keep boosting their profits on producing gasoline.
      Currently, those profits are at least dampened by consumer outrage at
      the pump.
    •  The suspension won’t address the market speculation that has
      boosted oil far beyond supply and demand needs. It won’t push Congress
      to eliminate some of the completely unneccessary tax subsidies that
      only add to oil companies’ outrageous profits. It’s a quick fix with no
      long-term plan behind it.
    •  At the end of summer, when the tax is to be restored, Congress
      will be under intense pressure not to do it, especially if prices keep
      rising. Imagine what the reaction would be if Congress added 20 cents a
      gallon to today’s prices, right now. But without the tax, U.S. road
      infrastructure turns into one big pothole, and dangerous old bridges
      may rot until they fall.

    Sen. McCain knows a good populist idea when he sees one. Its true
    cost just won’t become visible until it’s too late to hold anyone

    In California, on the other hand, drivers are really
    being stiffed
    by the state’s percentage sales tax on gasoline
    (currently 7.5%), because it rises in tandem with pump prices. This has
    the effect of suppressing any action to control gasoline prices,
    because the state wins when drivers suffer. Legislators should convert
    the tax to a flat amount–but one reason they don’t is the impossible
    two-thirds vote needed to increase any tax. It’s a failure of both
    state law and political will.




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