All Economists Despise 'Gas Tax Holiday', What With Its Hilarious Lack Of Logic
Many of you may be aware that gas prices are rising about 20 cents a week, causing much despair among Average Americans. John McCain found the perfect anti-solution for this energy Depression, in which the price of crude oil is reaching $120 a barrel, in his hilarious tax plan (the other aspects of which include slashing corporate taxes from 35% to 25%, eliminating the alternative minimum tax entirely thus re-opening old loopholes for the wealthy, and making the Bush tax cuts permanent -- all of which will be balanced by the elimination of like $200 million in earmarks). McCain proposes a "gas tax holiday" -- a break from the current 18.4-cent gas tax between Memorial Day and Labor Day -- and Hillary Clinton has announced she is all for it as well. Barack Obama isn't. Every. Single. Economist. Agrees with Barack Obama -- even the conservatives and Hillary's favorite Paul Krugman!
While the "tax holiday" looks nice to the Average American, because it is both a vacation AND an elimination of taxes, it is completely void of any economic sense. At least supply-side theory pretends to have a logic behind it. Even former Bushies hate the tax holiday, it being such a comical insult to their profession:
"Score one for Obama," wrote Greg Mankiw, a former chairman of President George W. Bush's Council of Economic Advisers. "In light of the side effects associated with driving ... gasoline taxes should be higher than they are, not lower."
And it's not just that 18 cents/gallon off of your fill-up is insignificant. It's that THERE WILL BE NO 18 CENTS/GALLON OFF OF YOUR GAS BILL AT ALL, but, uh, oil corporations -- already making record profits -- will have one less tax chipping away at their revenue. Tell them, Hillary Clinton economist Paul Krugman:
Why doesn't cutting the gas tax this summer make sense? It's Econ 101 tax incidence theory: if the supply of a good is more or less unresponsive to the price, the price to consumers will always rise until the quantity demanded falls to match the quantity supplied. Cut taxes, and all that happens is that the pretax price rises by the same amount. The McCain gas tax plan is a giveaway to oil companies, disguised as a gift to consumers.
Hillary plans to raise taxes on oil profits as a nice balance. But another simple idea would be to just keep the same fucking tax on them, and not make legislation that is made of air, and maybe also drop out of the presidential race so John McCain can stop passing off such jokes as reality. But that's only what Jeremiah Wright would want, we suppose.
Clinton-McCain gas tax holiday slammed as bad idea [Reuters]
Gas tax follies [Paul Krugman's blog]