The Gas Tax Vacation: A Cheap Holiday

Rolling back the federal fuel levy would do little to ease pump-price pain.

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Of the many ideas cheapened by this election year's campaign rhetoric, perhaps none has been devalued as much as the notion of a holiday. The "summer gas tax holiday" first proposed by Republican nominee John McCain and quickly taken up by his would-be Democratic opponent, Hillary Clinton, would put $18 more in the pocket of the typical driver this summer, says an analysis by the Taxpayers for Common Sense.

Of course, the antigovernment-waste group is relying on the analysis of Jeffrey Perloff, an economist at University of California-Berkeley, who says only half of the savings would be passed on to consumers. But let's assume he's wrong and motorists will see all of the savings. That's $36, and still sounds like a pretty cheap holiday to me.

Sadly, the pump price has been rising so quickly that rolling back the 18.5-cent federal tax on gasoline would take us all the way back to the week of April 15, which is when McCain first proposed it. Things seemed so much better back then, when the price at the pump was up only 18 percent from last year instead of 21 percent.

Clinton has invoked the cause of the truckers to defend the idea of a tax holiday idea, which her opponent Barack Obama has derided as a short-term, quick-fix'" proposal (although he supported a smaller temporary state tax rollback when in the Illinois Legislature in 2000). Clinton said the American Trucking Association says it would save the industry $2 billion this summer. It is true that subtracting the 24.4 cent diesel tax would have a bigger impact on truckers than the gas tax would have on auto drivers. Truckers would have to go all the way back to the week of March 10 to see prices again that low.

I happened to talk to ATA President Bill Graves this week, and although he supports what he refers to as McCain's idea, he admits that the truckers are divided on how helpful it would really be.

"I think that given how expensive fuel is—gasoline for the commuting public and diesel fuel for commercial vehicles—many people would welcome any relief in any form at any time," said Graves. "But I'll follow by telling you that my members' opinions are across the board on how significant it would be, and whether there would be a lasting effect. Some believe that if we suspended the tax, that savings would be backfilled by the simple rise in the basic cost of the commodity."

But that's not to say that a gas tax holiday would have no impact at all. Taxpayers for Common Sense calculated that the U.S. Highway Trust Fund, which already is on the brink of a $3 billion deficit by the end of 2009, will see its revenues fall by more than $9 billion if the gas and diesel fuel taxes are suspended this summer. Better not drive over any interstate bridges on the way to that summer tax holiday.

To be fair, Clinton has said she'd pay for a gas tax suspension by imposing a windfall profits tax on the oil companies. So she would achieve a neutral impact on the budget by matching up two ideas that appear to have absolutely no chance of passage instead of just one.

Clinton insists she is thinking of working people when making her pitch for a gas tax holiday. "It will be very helpful to a lot of people. There are folks who commute 60 to 75 miles," she says. "It's going to be a lot more for them." That's probably about double the Taxpayers for Common Sense estimate of 4,000 summer miles, so let's say those folks would see the entire 18.5-cent tax break and get a $72 bonanza by August. Given the average 27-mile-per-gallon vehicle out there, they'd still be consuming 300 gallons of gasoline and paying more than $1,000 for it this summer. But the fact that so many people are commuting by themselves in none-too-efficient vehicles for 60 to 75 miles per day—that's part of our energy problem, and it needs a more creative and deeper solution than an extraordinarily cheap holiday for the drivers.