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Tuesday, May 06, 2008

More On Why The Gas Tax Holiday Is A Bad Idea

The Freakonomics blog continues on the hunt for a reason why the gas tax holiday is a good idea.

Last week I posed a simple challenge: Try to find any coherent economist willing to support the gas tax holiday proposed by candidates McCain and Clinton.

The challenge remains unanswered, but here’s some interesting commentary collected during the week:

As I indicated before, there are plenty of ideas why it wouldn't help your wallet, but not many why.

Sunday, May 04, 2008

Gas Tax Holiday is a Bad Idea

Hillary Clinton has come out in support of John McCain's gas tax holiday idea.

She is quoted as saying the following,

"All I hear about is gas prices. Gas and diesel, everywhere," Clinton said in Kinston, N.C. "Some people say we don't need to get a gas tax holiday at all, it's a gimmick ... I want the Congress to stand up and vote. Are they for the oil companies, or are they for you?"

Here's the problem with that statement.  First, removing the gas tax will benefit the oil companies by selling more gas and hurt the government (and construction workers) by stopping the flow of money into the fed's coffers to pay for road projects.

Second, removing the gas tax will hurt airlines, Amtrak, and bus companies by encouraging people to drive instead of take a mass-transit system.

So what could be a golden opportunity for the United States to reduce it's obsession with driving, is instead going to result in less than 20 cents being taken off the price of a gallon of gasoline in Clinton/McCain world.

The best part is the oil companies would probably raise their prices in the absence of the tax because consumers would be willing to accept it in lieu of the absence of the tax.