Wednesday, April 16, 2008

The lunacy of a "Gas Tax Holiday"

Yesterday, Senator John McCain proposed a "Gas Tax Holiday." His idea is that, during the busy summer travel time between Memorial Day through Labor Day, the Federal government stop collecting the taxes that it imposes on unleaded and diesel fuel (which are 18.4 and 24.4 cents per gallon, respectively).

This idea is absolutely ridiculous. Yes, as some observe, cutting the gas tax would reduce the price of fuel at the pump and put more money in people's pockets. But the gas tax is not some random revenue-generating contribution that covers someone's pet projects. The money gathered up through the gas tax is the money used by the Federal government to maintain the Interstate highway system--and it is basically the only money that is used for this purpose.

Why should we care? Here are three reasons:
  1. Safety. Road repairs keep us safe when we travel. If you think 18.4 cents per gallon is going to save you so much money, pull out your insurance policy and look at the deductible on your comprehensive policy. If you damage your car on bad roads, that's the policy that covers you. If you have it at all--and a lot of people don't--I'll wager that you'll spend a lot more in repairs if you get in an accident than you'll save on gas. Don't forget the medical costs, either. If the deferred repairs result in deaths, tack on funeral costs and emotional trauma. The cost of bad roads is much higher than you think.

  2. Free market economics. Americans love to tout the benefits of the free market, blissfully unaware that we live in one of the most coddled and regulated markets in the world. When fuel prices rise, the free market dictates that we either pony up the cash to keep driving at the same rate or we cut back. Getting the government to manipulate the price of fuel so we can cruise aimlessly or drive back and forth to the store two blocks from where we live--the two activities for which Americans most often use their cars, followed closely by driving absurdly long distances to work because we refuse to work near where we live--is ridiculous. That's something you expect from communists.

  3. Leverage. Eliminating the gas tax would save the average American driver between $3 and $6 per full tank of gas for a 10-20 gallon tank. Assuming that you fill up once per week, that's between $36 and $72 of cash in your pocket for the summer, which you in turn will duly spend in a few moments on an impulse purchase for something that you don't need. That same cut, however, will cost the Federal budget more than $10 billion in highway funds. As it is, our infrastructure is crumbling because the gas tax hasn't been raised in more than a decade. And many of you may not realize it, but it's the threat of withholding highway money from states that gives the Federal government leverage over the states on a huge range of issues. No taxes, no money, no leverage.
That last point may seem appealing to some of you, but consider this: you can always put more money in people's pockets by cutting taxes. If taxes are so unimportant, why not just eliminate them altogether and let everyone fend for themselves with no public goods at all? The answer is that our self-interests are better served by foregoing short-term gratification in favor of the long-term stability that comes from working together. That's why we have societies in the first place.

Don't be fooled by this pandering nonsense in an election year. Roads and bridges are public goods from which we all benefit, and keeping them safe is a lot more important than whether you have an extra $3-6 a week. Prices are high? Pay more or drive less. That's rational. That's how a free market works.

1 comment:

MG said...

You are so right about the juvenile American attitude to taxes. Everybody seems to love to kavetch about the government taking their money until they need something. And then its just the opposite: "More money for Medicare! More money to bail out my investment firm!" Gimme, gimme, gimme, gimme.

And don't get me started on that "I pulled myself up by my bootstraps" nonsense. Talk to anyone who makes that claim for five minutes and you'll find out that they took out a student loan, or a business loan from a member FDIC bank, or they went to public school. Grow up, people!