Gas tax holiday
Encyclopedia
In United States politics, the gas tax holiday or the gas tax loophole is a proposal made by presidential contenders Arizona
Senator
John McCain
and New York
Senator Hillary Rodham Clinton
to suspend the federal excise tax on gasoline
from Memorial Day
to Labor Day
in the year 2008. Proponents argue that this could potentially reduce the price of gas at the pump by about 18.4 cents a gallon for regular unleaded gasoline and 24.4 cents a gallon for diesel. If so, it is estimated the gas tax holiday would save consumers roughly a total of $30 over the three month period it would be instated. However, Barack Obama and others point out that the oil companies would not significantly lower prices and would instead pocket most of the tax cut, effectively turning the cut into a tax loophole.
Clinton demurred when asked to name a single economist
who supported the holiday, but libertarian
George Mason
professor Bryan Caplan
wrote a New York Times op-ed arguing that "we could do a lot worse than the gas tax holiday." He said that while he agreed that it would not seriously reduce prices due to increased demand, it was "a relatively cheap symbolic gesture that makes truly bad policies less likely" and that it would give oil companies an incentive to increase production.
Economic theory is very clear that the incidence of a consumption tax
(who is expected to pay the tax) is inconsequential. Even if it were to lower the cost paid by the consumer, it would just result in a spike in demand during the period it was in effect with rising prices in response.
Barack Obama
is perhaps the most visibly vocal critic of the measure. He and other critics of the proposal have exclaimed that the holiday would be nothing more than a "short-term, quick-fix" that will not solve the nation's current and long term problems of high oil prices and foreign oil dependency. They have nearly unanimously denounced the scheme as nothing more than pandering
for votes in the Indiana and North Carolina primaries.
Since the tax is collected from producers and given the fixed supply and high demand for gasoline, it has been considered unlikely that the producers would pass that savings on to consumers at the pump. Furthermore, State highway officials claim the move could eliminate nearly 300,000 jobs over the summer months due to nearly $9 billion in lost revenue that would be incurred if some other source of revenue is not found. Hillary Clinton has proposed levying a new tax on oil company profits in order to make up for it. However, both the Clinton and McCain proposals would most likely never be passed due to the overwhelming opposition of congressional leaders.
Arizona
Arizona ; is a state located in the southwestern region of the United States. It is also part of the western United States and the mountain west. The capital and largest city is Phoenix...
Senator
United States Senate
The United States Senate is the upper house of the bicameral legislature of the United States, and together with the United States House of Representatives comprises the United States Congress. The composition and powers of the Senate are established in Article One of the U.S. Constitution. Each...
John McCain
John McCain
John Sidney McCain III is the senior United States Senator from Arizona. He was the Republican nominee for president in the 2008 United States election....
and New York
New York
New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...
Senator Hillary Rodham Clinton
Hillary Rodham Clinton
Hillary Diane Rodham Clinton is the 67th United States Secretary of State, serving in the administration of President Barack Obama. She was a United States Senator for New York from 2001 to 2009. As the wife of the 42nd President of the United States, Bill Clinton, she was the First Lady of the...
to suspend the federal excise tax on gasoline
Gasoline
Gasoline , or petrol , is a toxic, translucent, petroleum-derived liquid that is primarily used as a fuel in internal combustion engines. It consists mostly of organic compounds obtained by the fractional distillation of petroleum, enhanced with a variety of additives. Some gasolines also contain...
from Memorial Day
Memorial Day
Memorial Day is a United States federal holiday observed on the last Monday of May. Formerly known as Decoration Day, it originated after the American Civil War to commemorate the fallen Union soldiers of the Civil War...
to Labor Day
Labor Day
Labor Day is a United States federal holiday observed on the first Monday in September that celebrates the economic and social contributions of workers.-History:...
in the year 2008. Proponents argue that this could potentially reduce the price of gas at the pump by about 18.4 cents a gallon for regular unleaded gasoline and 24.4 cents a gallon for diesel. If so, it is estimated the gas tax holiday would save consumers roughly a total of $30 over the three month period it would be instated. However, Barack Obama and others point out that the oil companies would not significantly lower prices and would instead pocket most of the tax cut, effectively turning the cut into a tax loophole.
Proponents
Presidential hopefuls John McCain and Hillary Rodham Clinton have both championed this proposal. The two political opponents purported this to be a short-term fix for gas prices that were set to hit $4 a gallon in the summer of 2008. With economic woes topping the American peoples' list of concerns, this became a hotly debated issue in the 2008 U.S. Presidential Election.Clinton demurred when asked to name a single economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...
who supported the holiday, but libertarian
Libertarianism
Libertarianism, in the strictest sense, is the political philosophy that holds individual liberty as the basic moral principle of society. In the broadest sense, it is any political philosophy which approximates this view...
George Mason
George Mason University
George Mason University is a public university based in unincorporated Fairfax County, Virginia, United States, south of and adjacent to the city of Fairfax. Additional campuses are located nearby in Arlington County, Prince William County, and Loudoun County...
professor Bryan Caplan
Bryan Caplan
Bryan Caplan is an American economist, a Professor of Economics at George Mason University, Research Fellow at the Mercatus Center, adjunct scholar of the Cato Institute, and blogger for Econlog. He is best known for his work in public choice theory and for his libertarian ideology.-Personal...
wrote a New York Times op-ed arguing that "we could do a lot worse than the gas tax holiday." He said that while he agreed that it would not seriously reduce prices due to increased demand, it was "a relatively cheap symbolic gesture that makes truly bad policies less likely" and that it would give oil companies an incentive to increase production.
Critics
The proposal has met criticism from a wide array of news sources, politicians, the vast majority of economists, and the Bush administration.Economic theory is very clear that the incidence of a consumption tax
Consumption tax
A consumption tax is a tax on spending on goods and services. The tax base of such a tax is the money spent on consumption. Consumption taxes are usually indirect, such as a sales tax or a value added tax...
(who is expected to pay the tax) is inconsequential. Even if it were to lower the cost paid by the consumer, it would just result in a spike in demand during the period it was in effect with rising prices in response.
Barack Obama
Barack Obama
Barack Hussein Obama II is the 44th and current President of the United States. He is the first African American to hold the office. Obama previously served as a United States Senator from Illinois, from January 2005 until he resigned following his victory in the 2008 presidential election.Born in...
is perhaps the most visibly vocal critic of the measure. He and other critics of the proposal have exclaimed that the holiday would be nothing more than a "short-term, quick-fix" that will not solve the nation's current and long term problems of high oil prices and foreign oil dependency. They have nearly unanimously denounced the scheme as nothing more than pandering
Pandering (politics)
Pandering is the act of expressing one's views in accordance with the likes of a group to which one is attempting to appeal. The term is most notably associated with politics...
for votes in the Indiana and North Carolina primaries.
Since the tax is collected from producers and given the fixed supply and high demand for gasoline, it has been considered unlikely that the producers would pass that savings on to consumers at the pump. Furthermore, State highway officials claim the move could eliminate nearly 300,000 jobs over the summer months due to nearly $9 billion in lost revenue that would be incurred if some other source of revenue is not found. Hillary Clinton has proposed levying a new tax on oil company profits in order to make up for it. However, both the Clinton and McCain proposals would most likely never be passed due to the overwhelming opposition of congressional leaders.