Monday, April 28, 2008

Five reasons the McCain "gas tax holiday" is a dumb idea

John McCain has proposed eliminating the federal gas tax (18.4¢ on gasoline, 24.4¢ on diesel) between Labor Day and Memorial Day, as a way to ease gas prices and stimulate the economy. He's been hammering Obama for opposing this idea, and Hillary has jumped on the bandwagon. But it's a dumb idea, and here's why:

  1. The Highway Trust Fund, which funds highway infrastructure, would lose revenue. Americans apparently have short memories; the I-35W bridge collapse was less than a year ago, but the concern for the state of our bridges and highways that it created seems to have been short-lived.
  2. The proposal is unlikely to pass Congress. The states would stand to lose Highway Trust Fund revenue. Representatives from large states with lots of highway miles will oppose it.
  3. There's no guarantee the pump price will go down. Oil companies might just end up absorbing the extra profit. We don't have much excess refining capacity in the U.S. The lower price would create additional demand, as people drove more; this would likely cause prices to go up again as more demand chased the same supply of fuel.
  4. It will worsen global warming. Lower prices, if they do appear, will discourage conservation and raise carbon emissions.
  5. It will discourage the development of alternative fuels. Part of the reason investment in alternative fuels has been slow to appear is because many investors lost their shirts in the 1990s, when oil prices suddenly tanked. High gasoline prices mean these alternatives can compete. If there's uncertainty that prices will stay high, investors will be scared off.

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