The McClinton Gas Tax Holiday Gimmick

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Mcclinton_button_2 Posted by: AzBlueMeanie

(Artwork courtesy of BuzzFlash.org The John McCain for President, Hillary Clinton for Vice President War Party Fusion Ticket | BuzzFlash.org)

Sen. John McCain has proposed a gas tax holiday for this summer, suspending the 18.4 cent-per-gallon federal gasoline excise tax and the 24.4 cent-per-gallon federal excise tax on diesel fuel between Memorial Day and Labor Day.

Not wanting to be outdone Sen. Hillary Clinton, like Arnold Horshack on the old sitcom Welcome Back, Kotter, waved her hands wildly and shouted "Oh! Oh! Senator McCain! Me too! Me too!"

The McClinton gas tax holiday gimmick is a blatant act of political pandering and a clear demonstration of poor policy judgment by both candidates. 

The federal excise taxes are collected from the oil companies at the point of manufacture, and are passed on to consumers in the retail price of gas or diesel fuel that you pay at the pump.  The federal excise taxes are a dedicated tax, meaning the taxes are dedicated to the Highway Trust Fund, which is the primary source of funding for highway infrastructure maintenance and construction. 

Suspending the federal excise taxes will only benefit the oil companies who will pocket the tax savings, at a time when the oil companies are enjoying astronomical profits. In the unlikely event that the savings are actually passed on to consumers, congressional analysts estimate that the savings to the average consumer would be no more than $30.  It wouldn’t pay for a tank of gas today.

The price of crude oil and retail gas prices will continue to rise this summer for a number of reasons, among them increasing global demand for oil, the summer peak demand for gasoline, declining crude oil supplies, an aging oil refinery infrastructure in the U.S. which is producing at maximum capacity, the investor speculation "bubble" in the commodities market, and a major reason – the rapidly declining U.S. dollar (to which crude oil prices are pegged).  Throw in a military confrontation with Iran that McCain and Clinton appear to be salivating over, and all bets are off.

The immediate impact of suspending the federal gasoline excise tax would be the loss of an estimated $9-10 billion in tax revenues dedicated to the Highway Trust Fund, and the resulting impact of the loss of an estimated 300,000 jobs in the highway construction sector.  See Democrats Divided Over Gas Tax Break – New York Times  Not a wise policy decision at a time when the country is in a recession.

As columnist Thomas Friedman recently noted in Dumb as We Wanna Be – New York Times:

"This is not an energy policy. This is money laundering: we borrow money from China and ship it to Saudi Arabia and take a little cut for ourselves as it goes through our gas tanks. What a way to build our country.

When the summer is over, we will have increased our debt to China, increased our transfer of wealth to Saudi Arabia and increased our contribution to global warming for our kids to inherit.

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We have no energy strategy. If you are going to use tax policy to shape energy strategy then you want to raise taxes on the things you want to discourage — gasoline consumption and gas-guzzling cars — and you want to lower taxes on the things you want to encourage — new, renewable energy technologies. We are doing just the opposite."

Our nation’s infrastructure is crumbling from years of neglect and under-funding, largely because of Republican opposition to increasing the federal excise tax on gasoline and diesel fuel to keep pace with actual needs for new highway construction and maintenance of aging infrastructure over the years.  By comparison, Europeans who pay some of the highest prices for gasoline pay a fuel excise tax of approximately $2 dollars-per-gallon.

Sen. McCain’s lame-brain idea has drawn criticism from his home state newspapers (I’m shocked!) who rightly dismissed his idea for being the political pandering it is.  McCain’s clunker  (The Arizona Republic April 16, 2008), and  McCain’s gas tax repeal idea full of hot air | www.azstarnet.com ®  (Arizona Daily Star April 21, 2008).  Sen. Clinton likewise has drawn criticism for her political pandering The Gas-Guzzler Gambit – New York Times  (New York Times, May 1, 2008).

The McClinton gas tax holiday gimmick will never see the light of day in the current Congress.  It is dead on arrival.  So is Clinton’s proposal for a renewed "windfall profits tax," which will have to await the next Congress.

1 COMMENT

  1. Roger, I hate to disagree with you, but the gas tax money will go to the gasoline retailers who will immediately hike the price back to where it was. It was tried once before – can’t remember the details – but that was the end result. What we really need is a windfall profits law. I believe Republicans would block it and there is no way the president will sign it.

    But I do agree with you that we need real help – not flashy gimmicks! To some extent, we can help ourselves by planning our excursions, keeping our tires at proper pressure and buying gasoline at the coolest time of day. There is a whatchamacallit that can be put on gas pumps that regulates the cost relative to the amount of gasoline actually pumped, based on the temperature. As I understand it, in higher temperatures you get less gasoline and that makes the cost even higher!!! I would hope someone would mandate that be put on all gasoline pumps and I think state law could do that.

  2. The only way to ensure that the “tax holiday” winds up in the pockets of consumers and not in the profits of the oil companies is a manufacturer’s rebate coupon issued with each gas purchase, redeemable from the U.S. Treasury. This process would prove to be expensive and inefficient.

    The tax holiday is just a give away to the oil companies who will retain the tax savings. This has been done before with little or no savings to consumers.

  3. AZBM,
    Believe it or not I agree with you: Screw the 18.5 cent tax cut.

    The answer to decreasing gas prices is two fold.

    One: Decrease speculation in the oil markets by opening up ANWR, the Eastern Continental Shelf and the Gulf of Mexico to oil exploration.

    Two, end all government subsidies. This includes ethanol, farm, solar, sugar, defense, housing, and oil while simultaneously freezing government spending at the rate of inflation. This will immediately shore up the declining U.S. Dollar and most likely will result in its immediate rebound.

    The hit we’re taking at the pump is from these two factors. It’s not just an increase in the price of oil, it’s also the crappy dollar because we’re overextended and in debt up to our eyeballs.

    Simply approving exploration will do wonders to drop the price of oil; you don’t even need to start drilling. OPEC will have no choice but to increase production to reduce the profitability of an increase of US oil production. This would result in the price of oil going down dramatically.

    Putting the country on a somewhat sound fiscal policy will also send a strong message to our creditors, resulting in a dramatic increase in the value of the dollar.

    This is how you deal with the price of gas and diesel. Not with tax gimmicks and the BS platitudes of “Change we can believe in.”

    Of course the do nothing Democrat Congress who has sat idly by while gas prices have “surged” since they took office would never show some balls by actually being the leaders they claimed to be and do the right thing.