Clinton-McCain gas tax holiday slammed as bad idea

[RedEarth]

Source: Reuters)

WASHINGTON (Reuters) - 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


Read more: http://www.reuters.com/article/topNews/idUSN3038243520080430?feedType=RSS&feedName=topNews

[acmavm]

1. Bad idea? Try absolutely horrible. And throw in a big dose of stupid.

[Leo 9]

2. All Economists Despise 'Gas Tax Holiday', What With Its Hilarious Lack Of Logic

All Economists Despise 'Gas Tax Holiday', What With Its Hilarious Lack Of Logic



Many of you may be aware that gas prices are rising about 20 cents a week, causing much despair among Average Americans. John McCain found the perfect anti-solution for this energy Depression, in which the price of crude oil is reaching $120 a barrel, in his hilarious tax plan (the other aspects of which include slashing corporate taxes from 35% to 25%, eliminating the alternative minimum tax entirely thus re-opening old loopholes for the wealthy, and making the Bush tax cuts permanent — all of which will be balanced by the elimination of like $200 million in earmarks). McCain proposes a "gas tax holiday" — a break from the current 18.4-cent gas tax between Memorial Day and Labor Day — and Hillary Clinton has announced she is all for it as well. Barack Obama isn't. Every. Single. Economist. Agrees with Barack Obama — even the conservatives and Hillary's favorite Paul Krugman!

While the "tax holiday" looks nice to the Average American, because it is both a vacation AND an elimination of taxes, it is completely void of any economic sense. At least supply-side theory pretends to have a logic behind it. Even former Bushies hate the tax holiday, it being such a comical insult to their profession:

"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."


And it's not just that 18 cents/gallon off of your fill-up is insignificant. It's that THERE WILL BE NO 18 CENTS/GALLON OFF OF YOUR GAS BILL AT ALL, but, uh, oil corporations — already making record profits — will have one less tax to pay. Tell them, Hillary Clinton economist Paul Krugman:


Why doesn't cutting the gas tax this summer make sense? It's Econ 101 tax incidence theory: if the supply of a good is more or less unresponsive to the price, the price to consumers will always rise until the quantity demanded falls to match the quantity supplied. Cut taxes, and all that happens is that the pretax price rises by the same amount. The McCain gas tax plan is a giveaway to oil companies, disguised as a gift to consumers.

snip

http://wonkette.com/385781/all-economists-despise-gas-tax-holiday-what-with-its-hilarious-lack-of-logic





http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=132&topic_id=5753984&mesg_id=5753984

[BOSSHOG]

3. My humble, non expert opinion

is that it is a very bad idea. We should not be encouraging people to drive this summer. Vacation at home, if at all. And let us earmark the taxes gained to specific infrastructure repairs now.

Having preached that, we must make about a 2,500 mile roundtrip for mandatory family business next month, estate settlement which cannot be put off. I figured it cheaper to drive then to fly.

[Andy823]

9. It wouldn't go into effect

This year anyway, would it? I thought this was their plan for when they become president. What I see is pandering to the people to make points during the election, then next year "IF" they became president, they would have some reason not to do it anyway.

I agree with you, vacation at home, or close by, and decrease the use of gas, and that would do more to lower the prices.

[TheCowsCameHome]

4. The idea is a joke.

If 18.4 cents equals about 5% of the cost of a gallon of gasoline, do you really believe gas dealers/distributors/processors/food stores will instantly drop the price of everything related to increased fuel prices proportionately?

No freakin' way - they will pocket the difference and we'll still be paying sky-high prices at the pump, grocery store, and everywhere else.

The stupid plan has holes big enough to drive a pregnant Hummer through.............

[9119495]

12. Even if they didn't...it is still only about $22 in peoples' pockets

after a whole summer. Such a small ammount makes no difference for anyone. Carpooling a few times or eating out one less time would equal that ammount.

[HockeyMom]

5. See how much Hillary and McCain think alike?

That is why I see very little difference between them. Bad ideas are the same bad ideas whether that person has a D in front of their name or not.

[NJmaverick]

6. Fortunately Obama is smart enough and enough of a true leader, not to mislead us

[WCGreen]

7. Great Minds and all....

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=3182277&mesg_id=3182277

[napi21]

8. IF there could be some law written along with the tax holiday that

would mandate passing the reduction on to at the very least the truckers, I'd support it. Theos guys are hurting, and many are just parking their rigs because they can't afford the $4.20/gal. I'm not going to say I don't care if the price of MY gas goes down, but 18¢ isn't going to help me as much as it would the trucker, and most people would also benefit by keeping those guys rolling.

Maybe it would be a better idea to eliminate the tax on diesel fuel instead.

[lostinacause]

15. Trucks do more damage to the roads then cars do.

When you consider the damage done to roads, the pollution caused by driving, and the congestion on the roads, transportation by trucks is heavily subsidized making it more appealing then other methods such as by train. Further the announcements of a gas holiday would only delay increases in contracts becoming more consistent with the costs that truckers face. A permanent decrease in the tax on diesel would also only provide temporary benefits to truckers at the expense of the economic damage done through subsidies which only end up helping the shippers in the long run.

[underpants]

10. $2.94

18.4 cents X 16 gallons

$2.94 in savings per FILL UP

How will YOU spend it?

[9119495]

13. I think I'll get that condo in Barbados I've been eyeing.

You?

[underpants]

14. Me?

find some change and get THREE lottery tickets!!!!

[zeusgrandchild]

11. more bad judgement from these two

america you can have a choice in november between obama and mccain or you can have a no choice presidential election between clinton and mccain
they are the same old school political hacks that repeatedly pander to gain ground the problem is in the consequences of their bad judgement.... it is what america is reaping as we continue on our downward sprial....from their bad judgement......short sighted pandering

[grytpype]

16. Hillary is about as smart and honorable as a Republican.

I don't know where her support comes from... all I can see is racism and sexism on her side... racist white under-educateds and white women.

[bluebellbaby]

17. Since when did the DU start pimping Bushco's ideas as sound policy!

I'm new and truly disappointed that any "adviser" to the Bush crime family would be quoted here and accepted as the gospel truth...The gasoline tax is an expansion on the so called "fair tax" were the poor...you and I...get suckered into believing something is what it is not..."truthspeak"...

The suspension of the gasoline tax wouldn't help the oil companies,it would help us and the claim that this reduction in the price of gas would make the demand for gas go up is crap...Who are the "Economists" as this article points to?

The oil companies planned this 16 years ago when they began shutting down the refineries in California, there are at least 10 refineries that could be "re-opened" or they could increase their current capacity to 100%, they are at 73% now...and this could be done overnight...which would lower the price of gas immediately...

The oil companies have controlled the gas supplies to increase the costs we pay...period!

The other point that the oil companies would benefit is a straight out lie, as Clinton said she would repeal the billions in susbsidies the oil companies have gotten under Bush and charge a "windfall profits" tax on the oil companies to cover the tax losses...

So in the end, the oil companies would start to pay us back some of the billions they have stolen...

[lostinacause]

30. It is safe to say that Mankiw is right in this regard.

The concept is called a Pigouvian tax. The notion is that driving places a series of costs on society through pollution, damage to roadways, and congestion. Taxes on fuel provide a way ensure that peoples incentives align with the society implicitly taking into the cost placed on society through the tax. As Mankiw says the tax is actually too low, not taking into account the full costs placed on society. You can complain that the tax is not sufficiently progressive if you wish, but a gas tax is certainly not the place to be concerned. The poorest people in society do not on vehicles and are not directly affected by the gas tax. People who actually drive by and large spend less then 20% of their income on gasoline. The current tax is roughly 5% of the price of gas. Even doubling it will mean less then 2% of current income. Giving a 2% discount in the middle class tax brackets would be sufficient to make the policy tax neutral. The fact that equality can be a priority while having a high gas tax should be evident from Europe. European gasoline taxes is well about any level that America could tax at.

The demand would go up, though certainly not enough to make the price increase back to its original level. Given people's insensitivity to gasoline prices the increase in price should be less then $0.02 unless everyone decides to take a last vacation based on the hype of the reduction.

Both Clinton and Obama have committed to repealing the subsidies (which they should have) and applying the windfall profits tax (which they shouldn't). In my opinion Clinton took the worst of both people place and combined them. The worse thing is when you look at the situation you see ineptitude from all of the politicians. You have politicians proposing to temporary lower the price of oil and enact taxation rules to punish oil companies because the price is too high yet no one has brought the issue of how America is going to deal with an era of high oil prices, particularly given that current infrastructure is based on cheap oil.

[catgirl]

18. Clinton Gas-Tax Proposal Criticized: Economists Share Obama's View

Source: Washington Post

A growing chorus -- including a top congressional Democrat -- labeled Sen. Hillary Rodham Clinton's proposal for suspending the federal gasoline tax ineffective and shortsighted yesterday, even as she continued to paint Sen. Barack Obama as insensitive to drivers' woes for not endorsing the plan

The Democrats' clash on the issue has emerged as a flash point in the week before the presidential primaries in Indiana and North Carolina and is emblematic of the broader contrast that the candidates have presented: Clinton says she would make immediate bread-and-butter fixes for struggling Americans, while Obama portrays himself as a truth-teller who would bring a new kind of politics to Washington and produce more lasting change.

Backing up Obama's position against Clinton's proposal to suspend the 18.4-cent-per-gallon tax for the summer is a slew of economists who argue that the proposal, first offered by Sen. John McCain, the presumptive GOP nominee, would be counterproductive. They argue that cutting the tax would drive up demand for gas at a time when the supply is tight, which would mean that the price at the pump would drop by much less than 18 cents per gallon.

The tax suspension would, as a result, cut into the highway trust fund that the tax supports, a loss of about $9 billion over the summer, but also result in fatter profit margins for oil companies. Clinton says she would replace the lost revenue by raising taxes on the oil industry.

Read more: http://www.washingtonpost.com/wp-dyn/content/article/2008/04/30/AR2008043003575.html?hpid=topnews

---

"but also result in fatter profit margins for oil companies". Yup.

[Captain Hilts]

19. It's a regressive tax, but we must encourage conservation. nt

[JerseygirlCT]

28. That's it. The tax is a good idea - now let's put some money

into rebates for those conserving energy, instead of supplementing everyone's gas habit (mine included).

How can we be so short-sighted about the issue? The solution isn't cheaper gas, or digging up more pristine land. We simply HAVE to find clean, renewalable sources of energy, and put serious money into R&D, and then supporting those new technologies until they're on their feet.

[baldguy]

20. "...the proposal, first offered by Sen. John McCain..."

So, its the McCain-Clinton Gas-Tax Proposal

They're already running mates.

[leftofcool]

21. Have these same "top democrats"

lived up to the promises they made in the 2006 election? Until they do, STFU! Impeachment is off the table my ass!

[catgirl]

25. STFU???? For posting a news story?

Perhaps you tell the Washington Post to STFU, not me.

[leftofcool]

26. Not directed at you..........to Dems in office

for not doing their job.

[catgirl]

29. OK

[KSinTX]

22. Tax holiday sham

It just drives up consumption, puts the increased demand proceeds into the pockets of the oil company shareholders and when it comes off hiatus, drives more people into the poorhouse. Sweet!

[madmom]

23. So why was it ok when Obama did in Illinois?

[Doctor_J]

24. Once again Hil is attacking from the right

She can't really think this will work in the GE, can she?

[catgirl]

27. She keeps teaming up with McCain

You have to wonder if they have nightly conversations.

[bronxiteforever]

31. McClinton