Posted by Damozel | Apparently, a number of state governors are all for a gas tax
holiday. Here in Florida, Governor Charlie Crist is fighting to get us
two weeks off in July. (NYT) And he is not the only one. 'Lawmakers in Missouri, New York and Texas have also proposed a summer
break from state gas taxes, while candidates for governor in Indiana
and North Carolina are sparring over relief ideas of their own.' (NYT) Furthermore, they apparently don't even care whether such a holiday would actually have the intended effect of saving people money.
“It’s about trying to serve the people and trying to understand and have caring, compassionate hearts for what they’re dealing with at the kitchen table,” said Mr. Crist, a Republican.
He added, “I’m supposed to respond to the people and try to make them happy.” (NYT)
Really? Good to know, considering he's my very own governor.
According to the article, state gas taxes are far higher than the federal excise taxes. '[S]tate gas taxes, which run as high as 45.5 cents a gallon, often add far more to the price of gas than the 18.4-cent federal excise tax and are the primary cause of price disparities across state lines.'(NYT) I did not know that.
Furthermore, the fury of Americans over gas prices ------- did you know that George W. Bush is still commander-in-chief and that he is apparently quietly inching nearer to a military strike against Iran with every passing day? --- 'highlights the political potency of anything that affects Americans’ bonds with their cars.'(NYT) Which is because it's the only way we can get from point A to point B in this massively spread out country, where many people have to drive for an hour just to get to work. It's not as if we have any really feasible alternatives.
But on the whole, I have disagreed with the proposals for a gas tax holiday by both McCain and Clinton. Setting aside the objections of this and that economist, I suppose I feel that high gas prices is something we're going to have to get used to and that a 'holiday' or temporary palliative will just increase the anguish of going back to the current high prices.
Anyway, on the whole, it's not an issue that I particularly care about. I don't have to agree with Hillary on every single issue to continue believing that she is the better candidate. But with all the argle-bargle in the media, it's an issue we've found ourselves having to focus on.
George Frost's article in Salon interested me. He argues that Obama';s criticisms of Hillary's proposal are 'either factually incorrect, or based on flawed logic. Could he be attacking Clinton just to deny her any political benefit? That would be as cynical and "old style" as anything Clinton has thrown at Obama lately.' (Salon)
In fact, he asks, why has Obama not come forward with a proposal of his own? As D Cupples pointed out a couple of days ago, and as Frost points out in Salon, ' He was certainly proud to back a gas-tax moratorium eight years ago.While an Illinois state senator, Obama supported a state tax holiday very much like Clinton's proposal, but without the saving mechanism of a windfall profits tax.' (Salon)
But now Obama's saying that the gas-tax moratorium in Illinois didn't work. Wrong, says Frost. 'In fact, the only scientific study done on the pass-through of the tax holiday savings to Illinois consumers (and those in Indiana, as well, whose citizens enjoyed a similar holiday) found that it actually worked to a large extent....' (Salon)
Frost explains how Hillary's plan could be designed to prevent the negative outcomes predicted by Obama.
[U]nder Clinton's plan, if properly implemented, any additional profit realized by an oil company by passing on the cost of the windfall profits tax to customers would also be subject to the tax. This means a dollar passed through to consumers to offset the tax would appear as profit ... and be taxed.
How to enforce this? Make it against the law for oil companies to pass the price of the windfall profits tax on to consumers, and then audit the oil companies' books. It is not a difficult accounting exercise to tax excess profits above a certain gross percentage per barrel of oil, or gallon of gas. Every major oil company has sophisticated profit segmentation reports that go to the very senior management of the company. These reports identify revenues, costs and profit at each level of the vertically integrated operation, broken down on a per barrel basis by product type, marketing region, you name it.
The oil companies also will have a powerful inducement to avoid being caught -- and in this kind of toxic political environment, they may actually swallow the tax. (Salon)
In any case, as he points out, Clinton isn't proposing this as an alternative to higher efficiency standards and a commitment to transportation alternatives. It's at best a palliative aimed at easing the burden on Americans who are least able to afford the tax. (Salon)
And, as Frost says, 'It takes a little bit of courage to take...on [the oil companies], and a belief that we do not always have to be victims. Obama -- where is your optimism?' (Salon)
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What Frost is really talking about with the "as much as 60% will reach the consumer" line is McCain's proposal, which actually IS a tax cut. Most of Obama's rhetoric is directed at McCain's proposal, so his criticisms are basically accurate. Clinton's proposal is not a tax cut, it's an accounting trick. (Which, for the record, is better than a tax cut, since a tax cut would be bad policy.)
Any windfall tax can and will be passed onto consumers if the dollar amount matches the gas tax. It will fill in the gap of the gas tax. All we're changing is where the taxes are applied along the supply chain. The idea that a tax added at the end, to the bottom line, will have a different effect than taking the exact same amount of money out before the sale, is plainly silly when you look at it. The oil companies will take into account the additional cost of doing business when they settle on a sale price to distributors, and distributors will be willing to pay more because they don't have to pay taxes on the gas they sell. Same total effect.
The above paragraph is not true if we start telling the oil companies what prices they are allowed to charge. But I am adamantly opposed to what Frost proposes, which is essentially price-fixing. It doesn't work for most economic goods. The regulation would be an unecessary auditing nightmare, and even if it works it would end up causing oil companies to reduce supply (basically, waiting out the "holiday"), leading to shortages. It's an exceptionally bad idea - thankfully, Clinton herself is not backing this idea.
Obama HAS announced his own energy plan, and he expanded on it in the wake of this whole gas tax issue. He has come out in favor of a windfall profits tax on oil selling at or over $80 per barrel. Based on the precentages he has suggested, the total amount of the tax would be roughly three times as much as the current gas tax revenue. He's suggested some of the revenue would go toward expanding LIHEAP, the Low Income Home Energy Assistance Program.
Personally, I would much prefer just tripling the gas tax. That way it's a lot easier to make sure the foreign suppliers are hit with the same tax as the domestic suppliers. (Actually, I prefer increasing gas taxes not by a factor of three but by a factor of nine or ten, but that's another story.)
Posted by: Adam | May 06, 2008 at 11:53 AM
As Atrios posted the other day, if the government wants to reduce revenue by an average of $30 per person and let people have it to spend on gas, then JUST SEND THEM A CHECK.
Posted by: PSoTD | May 06, 2008 at 12:10 PM