McCain Calls Gas Tax Vacation
John McCain has called for temporary tax cuts in order to relieve the burden of higher gas prices.
Republican Sen. John McCain on Tuesday called for a summer-long suspension of the federal gasoline tax and several tax cuts as the likely presidential nominee sought to stem the public’s pain from a troubled economy.
Timed for the day millions of Americans filed their tax returns, McCain offered some immediate steps as well as long-term proposals in a broad economic speech. The nation’s financial woes have replaced the Iraq war as the top concern for voters, and McCain, who has said economics is not his strongest suit, felt compelled to address the problems as he looks ahead to the November general election.
A suspension of the gas tax is good politics and an interesting, if not particularly novel, bit of symbolism.
Economically, though, it’s unlikely to do much good. For one thing, 18.4 cents a gallon on gas or 24.4 cents on diesel isn’t going to matter all that much unless you’re a long haul trucker or otherwise drive a ridiculous number of miles. Nor are consumers likely to get even that much relief; it’s just more room for producers and sellers to raise prices and profit from the high demand for gas.
UPDATE: Dave Schuler has written a whole series of “The Candidates on the Economy” posts with, I suspect, more to come.
I just wrote on this one, too. I think it’s fiscally unsound and, worse, won’t provide much if any fiscal stimulus.
We really need to open a new can of politicians. The current crop has no notion of the size of the economy and how large a Keynesian stimulus would have to be to do anything.
I wonder how much it would cost to establish a federally-supported Home for the Fiscally Insane. Or is that the Congress?
Bingo, James. And there you have the flaw in the current incarnation of the ‘free market system’ – the insistence, by both businesses and their shareholders, on unsupportably high profit margins. Without some sort of government regulation and oversight to stop that kind of profiteering and collusion (because that’s exactly what you describe, when done by all oil producers simultaneously & to the same penny), no amount of lip-service like McCain’s proposal will actually improve the economy.
Collusion is against the law and profiteering is very restricted as well. How much of either is going on is hardly clear.
Certainly, gas prices aren’t colluded to down to the penny. There’s probably a 40 cent a gallon variation in price for premium unleaded in the DC area with prices mostly in a 10-15 cent range. Stations with more advantageous positioning (i.e., right off the Interstate or not near other stations) tend to charge more. Those within sight of one another tend to charge within 2-3 cents of one another given the tradition of posting prices in giant signs visible from the road. (Something no other commodity does, BTW.)
Disappointing coming from McCain, so much for Straight Talk. Straight Talk was Ross Perot’s 50-cent gas tax hike. Is the point to reduce our troubling federal budget surplus or is it to incent Americans to drive more and use more gas? Because those sure are really critical goals right now. If this is how he panders in April, what will he be saying in October? I say this as someone inclined to vote for him, despite his bone-headed foreign policy.
Dumping the gas tax will just add 18¢ to the margin at the oil company, moving revenue from Washington to Tehran or Ottawa or wherever the heck our oil is coming from these days. What’s more, most people don’t seem to realize how good they have it. The gas tax was last raised in 1994, when 18¢ was quite a lot more as a fraction of the total sale than it is now. Also note that in nations with effective transport policies, the retail gas tax is universally higher than $1/gal. In the UK it’s $5/gal.
Restricted, yes. But investigated & enforced? That a big question mark. About a year and a half ago, here in Boise, people started noticing that even though national news stories were touting a gradual drop in gas prices, the pumps here kept going up. Nothing happened until a newspaper story mentioned that the State AG was considering looking into the matter. Within a week, _all_ gas prices in the area dropped 10-15 cents. Simultaneously.
Likewise, in the situation you propose, 18 cents comes off the top of the cost to put a gallon of gas into the pumps. If that same 18 cents isn’t reflected in the price, it’s pretty clear evidence that somebody in the chain is soaking that rebate as pure profit. If _every_ gas station still has the same or similar prices for gas, it’s de facto evidence of collusion. And if that evidence is never investigated, then what McCain has just proposed is simply an enormous profit boost for the oil companies…
At least in the immediate term, yes. But that’s legal in most cases, isn’t it?
If, for example, I want to charge $1 million a week for BlogAds, I’m free to do that. If I can get somebody to pay that, that’s roughly $1 million in pure profit. Presumably, though, I’d have a hard time.
What if all the other blogs saw what I was doing, and decided to follow suit, they’d be free to do that, too, right? As with gasoline, the prices are right there on the marquee, so we wouldn’t have to collude.
Now, granted, gasoline is a “necessity” whereas advertising is only really important. But if a gas station owner thinks “Hmm, they were willing to pay $3.65 yesterday, why not today? I’ll make 18 cents PURE PROFIT muaaaahaaahaaa” that’s not a crime. If the CEO of ExxonMobile gets together with the CEO of BP, though, and does the same thing, that’s collusion.
guys… Time after time, and in Congresses run by both parties, the oil companies have been investigated for such rule bending profits. No evidence was ever found of any of it.
None. By the government’s own reports, the oil company profits around 3 cents per gallon. Now, are you going to tell me that both the Republcains and democrats are lying to us about where the money’s going? com’on.
Most of the regional price differences have to do with transportation costs of getting the product there.
IIRC from my econ degree, the general though on things like sales taxes is that, if they were removed, buyers and sellers would split the resulting surplus (e.g., prices would come down but not by the full amount of the tax).
Releasing from the strategic reserve could very well drop the price more than the tax. The sudden release might drive speculators out of the market and result in lower prices with stability. Likewise creating a real national energy policy that includes aggressive exploration, exploitation, and refining could also return some sense of sanity.
There are plenty of good things that could be done yet our congress will not do them. Ignoring this problem will not make it go away. Either take the right steps or a recession will lessen demand and bring prices down.
I just read McCain’s plan would suspend new orders for filling the strategic reserve. A start but releasing would be better.
The strategic petroleum reserve does not exist to pander to Joe and Jane Escalade on their way to the Golden Corral buffet off I-42 up in Lumpenville. It’s “strategic”, as the name suggests.
“Economically, though, it’s unlikely to do much good. For one thing, 18.4 cents a gallon on gas or 24.4 cents on diesel isn’t going to matter all that much unless you’re a long haul trucker or otherwise drive a ridiculous number of miles.”
Yeah, what idiot would think that lowering the price of the transportation of goods would in any way help the economy?
If McCain wants to win this thing, he needs keep quiet on domestic policy. His ideas are so crackpot that he is going to have trouble getting anyone to take him seriously.
Unfortunately, the same goes for his foreign policy. A better strategy would be to just harp on about how Obama is a radical muslim, anti-American Christian, Black Nationalist.
Riggggggggggggggth.
Here in the Bay Area, we have quite a few refineries. We also have probably the highest gas prices in the country. Is it the six blocks they have to go between refinery and filling station that is driving our costs up?
Gosh sometimes were to smart by half. Price controls? When have they ever worked. The free and open market should be just that. Oil companies make roughly 8 cents a gallon profit, the government( local and Federal) make any where from 50 cents to a dollar a gallon, kind of one sided isn’t it. America has oil coming out of our collective wazoos, but we can’t even drill for it let alone refine it. How is it that Cuba with partnership of China for crying out loud can drill in the Gulf (and strike 80 Billion barrels Est.) Mexico drilled and struck pay dirt, but we can’t for crying out loud, this is beyond stupid it’s detrimental to are very existence. Lets instead create a depression with rising food prices, independent truckers parking and walking away from their trucks, food can’t get to the market, food being used for fuel instead of purpose intended, we are now importing refined gasoline because were not allowed to build a damn refinery. So let’s argue about Oil co. Profits instead of allowing them to use these same profits to drill and build refineries, but no thats just to damn simple.
In your case, it’s government that’s the problem.
Demanding specialty blends, demanding that these blends change with the seasons, and of course taxes. Have you ever noticed the amount of taxes that go into a gallon of gas, there? I suggest you point at Sacramento as the source of your problem.
Let’s move to Canada – the Right is doomed! The news coming out before November is that John McCain was brainwashed in Vietnam as a POW and has been ating as a deep mole in the US government for 30 years! Now his commie masters are about to trigger his programming to destroy us utterly during his presidency, after which we will be forced to become socialists. And – worse yet – while a POW, McCain was allowed the spiritual comfort of an Islamo-Marxist Imam, as he will reveal when he takes his Presidential vows with his hand on the Koran, then announces his committment to ‘global revolution’ in his inaugural address! We have no choice here! Those who love America must leave it quickly, before catastrophe occurs!
What? Move to Canada? Let the serious people do the talking please.
Jeffrey W. Baker’s point is true, it’s there to pander to the public. But the filling of the reserve in recent years has had an undesirable effect on the market. That distortion can be halted for a while until the current frenzy has dissipated.
It never made a lot of sense to fill this reserve when prices were so high and why was it effectively empty? If we released all purchases for the last month back into the system and didn’t buy any for a month we would see not only a stimulus of cash savings for consumers but also a change in consumer confidence. Both are sorely needed.
A release doesn’t cost the government anything and could save the government by reducing the cost of the oil it purchases for filling the reserve.
If we really wanted to be “strategic” about oil we would get a real energy policy that promotes everything from new drilling to nuclear to conservation to solar, wind, geothermal, and whatever else can be thought up. Except ethanol, that’s turned into crap pretty quick.
Sorry, Jeffrey W Baker’s point is true, it’s NOT there to pander to the public.