Gas Tax Holiday: Boon or Bane?

Evan Miller | Wed, Apr 30, 2008 | Tags: obama, clinton, cnn, republican, energy, infrastructure, evan miller, the new argument, oil, money, highway, construction, jobs, hillary, labor, mccain, nominee, average, taxes, christmas

As families prepare for summer road-trips riddled with sing-a-longs, bickering and inconvenient pleas for bathroom breaks, lawmakers are wondering if a proposed gas tax holiday will make it easier for travelers to make it out of the city without exhausting their funds for summer fun.

Sen. John McCain (R-AZ), the presumptive Republican presidential nominee, was the first of the three remaining presidential candidates to put forth a plan advocating for the temporary lift of the 18.4-cent federal gas tax. McCain’s proposal also includes a vacation from the 24.4-cent gas tax on diesel fuel. The proposed holiday would be enacted during this summer’s peak driving season, which spans from Memorial Day to Labor Day.

While this “Christmas in July” is hoped to spread some much needed holiday cheer in the face of an economic recession, Democratic leaders have mixed feelings about the potential infrastructural sacrifices that would have to be made.

A New York Times article references a report from state highway officials that estimates a $9 billion revenue loss, and a “cost of 300,000 construction jobs” if McCain’s plan is implemented. The current gas tax directly finances the highway trust fund, seen by most as necessary assistance to a fractured infrastructure on the brink of collapse.

Democratic presidential candidate Sen. Hillary Clinton (D-NY) supports the notion of a gas tax holiday, but because of the potential negative impact to highway and bridge projects throughout the country, has proposed an alternative plan. Her proposal would make up for lost tax revenue by instituting a tax on the profits of oil companies. According to a CNN report, this “windfall profits tax” would subject oil companies to a 50 percent tax on profits above a certain point. This plan would also reportedly close $7.5 billion in loophole opportunities for oil companies and “monitor prices for manipulation.”

Democratic presidential candidate Sen. Barack Obama (D-IL) however, does not support either proposal, calling the very idea a “political scheme.” Obama contends that the average driver would only save between $25 and $28 over the entire summer and that such plans would merely offer a short-term solution to a much deeper issue.

Obama continues to support his own plan to use money procured by raising taxes on the profits of oil companies to lower energy costs of American households.

Clinton has received considerable criticism for a rumored contradictory position she took in 2000 when she opposed a similar gas tax holiday. Although she did oppose such proposition, it was due to the plan’s failure to account for the lost tax revenue. It is for this reason again that Clinton opposes McCain’s plan, and has proposed her own in response.

Although many Americans like the idea of paying less at the pump, the cost of a gas tax holiday has divided lawmakers on both sides of the aisle. While McCain’s plan does not account for the lost income, Obama argues that Clinton’s use of tax increases on oil companies can be better used to alleviate the burden of Americans’ increasingly hefty energy bills.

Whether or not approved as a holiday, with BP and Shell continuing to report record profits, this “‘tis the season” proposal makes one thing clear – oil companies should expect coal in their stockings in the coming year.

-Evan Miller
The New Argument

Evan Miller is the editor of The New Argument and a guest writer for The Next American City.