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Gas tax rumble a very important indicator
Posted by: McQ on Tuesday, April 29, 2008

The argument between the presidential candidates over whether to suspend the federal gas tax in a time of high fuel prices provides a window into their thoughts about the role, size and purpose of government. Or said another way, who or what they have the most concern for.

John McCain wants to suspend it, at least for the summer, to give consumers, nation wide, a break by lessening the price at the pump, where consumers are most directly impacted. The amount may not be huge, and the impact per family may not be that large, but what it indicates, at least to me, is an understanding that government must serve the people, that government must sacrifice and that it must tighten its belt before it asks citizens to tighten theirs.

Interestingly, Hillary Clinton has agreed that suspending the federal tax as a good way to positively impact fuel prices at the pump.

OTOH, we have many Democrats and Obama claiming that it is foolish to do so. And their argument? Well, of course, the government needs the money.

Robert Byrd is typical of them.
Sen. Robert Byrd, D-W.Va., called McCain's idea "dangerous."

"This proposal would have dangerous consequences," Byrd said. "It would disrupt road construction projects across the country, and stymie economic development in the midst of a recession.

"Instead, we should be getting tough on oil companies who are reaping astronomical profits, and be pushing oil producing countries to lower prices, especially the ones benefiting from the national security efforts of the American taxpayers."
"Dangerous?" What's "dangerous" about this is the precedent. Actually stepping away from a tax and observing that the government doesn't collapse.

Also note the belief that it is government who is providing the stimulus to recover from a recession (with road projects?).

Last but not least - the populist target of choice? The oil companies of course. We've discussed at great length the amount of profit, taxes and enormous up-front costs these companies pay toward exploration and recovery. We've also pointed out that the companies are publicly held and owned by hard working Americans in their pension, retirement and 401k funds.

And, of course, Obama is saying the same thing as Byrd. He's all for the "windfall profits" tax on oil companies and completely against a gas tax break because, well you read the spin:
Obama returned the criticisms at a town hall today in Wilmington, North Carolina, saying that McCain's support of the gas tax holiday is not a proper fix for the problem of energy crisis, nor will it help people in the short term.

Obama said the savings would only amount to $25 or $30 dollars, "or half a tank of gas," and that McCain's plan and criticism are misplaced.

"He had the gall yesterday to tell me that obviously, because I didn't agree with his plan, I must not be sympathetic to poor people. That's what he said," Obama exclaimed, and then turned the table back at McCain, "This is at the same time that he is proposing hundreds of billion of dollars of more tax breaks for corporate interests to the wealthiest Americans, and he doesn't explain how it is that we're going to pay highway trust fund."
I don't recall John McCain ever offering the gas tax holiday as a "proper fix" for the "energy crisis", do you?

And if you commute to work everyday, that $25 or $30 on a tight budget may mean the difference between meeting your budget for the month or going further in debt.

So who is out of touch here? Who is coming off as the big government elitist? Whose concern is government first and the people second?

Obama, using his populist rhetoric to try to conceal this truth says:
"That's typical of how Washington works. There's a problem: everybody's upset about gas prices. Let's find some short term, quick fix. That we can say we did something, even though we're not really doing anything. Because if you actually took away the gas tax, what are the oil companies going to do? They're gonna raise your gas by 5 cents. You'll never see the savings. And then we pretend to do something."
Ah, thank goodness for the "big bad oil" boogy man to fall back on, huh? The point, of course, isn't that the tax holiday is a "fix", it is temporary relief. It is a descent idea that gives citizens a tax break - something Obama says over and over again his is all for when it comes to the middle class. But when he's given an opportunity to put the money where his mouth is, he sides with Robert Byrd.

Oh, and FYI:
Senator Obama while in the Illinois State Senate in 2002, voted to suspend the 5% state sales tax on gasoline.
Wouldn't you just love to know why?
 
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Oh, and FYI:
Senator Obama while in the Illinois State Senate in 2002, voted to suspend the 5% state sales tax on gasoline.
Wouldn’t you just love to know why?
I do believe he was up for re-election that year, though I could be mistaken...

It was also going to pass by a wide margin, so he wasn’t taking a risk in voting for it...
 
Written By: Scott Jacobs
URL: http://
Last but not least - the populist target of choice? The oil companies of course. We’ve discussed at great length the amount of profit, taxes and enormous up-front costs these companies pay toward exploration and recovery. We’ve also pointed out that the companies are publicly held and owned by hard working Americans in their pension, retirement and 401k funds.
I’m going to pay about $4500-$5500 in gas this year. I’m not earning that much from the energy sector in my 401(k). Its portfolio is probably 10% diversified on energy sector stock. Nothing specific to oil commodities and I probably couldn’t do much better with my company’s options. I also am not going to be able to catch it when it crashes either since our exchanges are close of business that day and more likely the next day and I’m not a day-trader anyway.

So when I weigh my personal benefits versus losses, I’m still getting screwed.

And the oil companies might complain about regulation. But the reality is they’ve been regulated into record profits. I’m not crying for them. The governments ’solution’ is increase the amount they gouge me over it.

Prices are at the point now where they will affect consumer behavior. People are talking seriously about cancelling/curtailing trips this summer. Which means that in about $.75-$1 more they actually will.

With the price territory we’re entering, people stop doing things like instead of running out right away to replace a light bulb, they live with it until they pass the hardware store for other reasons. Or instead of taking the kids to the local amusement park, they let the kids go with the neighbors. That will be two adults not blowing money in overprices restaurants.

People being able to move freely & cheaply = more money spent and a faster velocity of money in the economy.

The price of gas when high enough + the percieved recession will make people act like we are in one. And such behavior is self-fulfilling.
 
Written By: jpm100
URL: http://
I used to agree, at least on an emotional basis, with the politicians and the "big oil" meme. And then I grew up and started thinking.

The biggest reason that oil is $115+ a barrel is that we have cheapened the dollar. The dollar vs. virtually every other currency has sunk since last year.

"Big Oil" doesn’t control the well head price of oil now (if the ever did).
 
Written By: Loren
URL: http://
The biggest reason that oil is $115+ a barrel is that we have cheapened the dollar.
Yup.

We covered that yesterday.

But when you’re running on a populist platform and you know that most folks aren’t going to take the time to figure that out and, as you mention, it is emotionally rewarding to blame big oil, it pays, electorally, to feed that sort of economic ignorance.
 
Written By: McQ
URL: http://www.QandO.net
When oil is pulled out of the ground for $30-$50/barrel and when I buy it in gas form it is valued $120/barrel and there is a conscious effort to manipulate supply, I guess I get emotional.

The additional cost of taxes (and to some degree refining) also seem to be a multipling factor and not an additive factor doesn’t seem to help either. For example, both effects should not be reflecting currency changes as severely since gas is 90+% domestically refined. So since half the price of gas is almost refining/distribution/taxes, its price change should muted in the face of currency swings.
 
Written By: jpm100
URL: http://
While I certainly embrace your cynicism toward the politicians, I don’t entirely embrace your cynicism toward the gas tax itself.

The gas tax is either a legitimate Pigou tax or it isn’t. Reasonable people can disagree on that.

But what reasonable people cannot disagree on is the absurdity of suggesting that the gas tax can somehow be a legitimate Pigou tax on Thanksgiving Day but not on Independence Day.

So in that sense, "advantage Obama." (The fact that he may have flip-flopped on the issue simply returns them to "Deuce.")
 
Written By: KipEsquire
URL: http://www.kipesquire.com
wow for a bunch of people that love to talk about economics i see that you have no idea what the removal of gas tax would do to the demand for gas. if you were to remove the gas tax the price would lower and then demand would increase which would then increase the price. and then we would be back at were we started. the real solution from a economic point of view would be to reduce the demand for gas and that would bring down the price. all you would to is lessen the tax monies from tax to fix our already falling apart infrastructure. i guess being a libertairan doesnt equal knowing anything about economics.
 
Written By: slntax
URL: http://
if you were to remove the gas tax the price would lower and then demand would increase which would then increase the price. and then we would be back at were we started.
The Federal tax on gasoline is 18 cents per gallon. With the average price per gallon of unleaded currently at $3.60 or above, a reduction of 18 cents translates into a reduction of just less than 5%. If you think a 5% reduction will drive demand up, you don’t know much about economics yourself.

(Note: However, your comment regarding infrastructure has merit.)
 
Written By: SShiell
URL: http://
But what reasonable people cannot disagree on is the absurdity of suggesting that the gas tax can somehow be a legitimate Pigou tax on Thanksgiving Day but not on Independence Day.
Has anyone suggested that (aside from, perhaps, Obama)?


 
Written By: Don
URL: http://
wow for a bunch of people that love to talk about economics i see that you have no idea what the removal of gas tax would do to the demand for gas. if you were to remove the gas tax the price would lower and then demand would increase which would then increase the price. and then we would be back at were we started. the real solution from a economic point of view would be to reduce the demand for gas and that would bring down the price. all you would to is lessen the tax monies from tax to fix our already falling apart infrastructure. i guess being a libertairan doesnt equal knowing anything about economics.
Usually leftist idiots like to point out that demand for gas is fixed. Now you are arguing that it’s linear.

Neither is true.

As gas prices go up, I’ll lower my rec usage, but I’ll continue to drive to work. Part of my gas usage is more or less linear with price, part isn’t.

A bigger point is that prices are based upon a global commodity. US demand is only part of worldwide demand for oil. Prices won’t rise in direct proportion to an increased US demand.

 
Written By: Don
URL: http://
wow for a bunch of people that love to talk about economics i see that you have no idea what the removal of gas tax would do to the demand for gas. if you were to remove the gas tax the price would lower and then demand would increase which would then increase the price.
Ah, I see ... so when gas $1.80 a gallon, we had twice the demand we do now?

Can’t imagine there may be other uses for the money than buying more gas?
 
Written By: McQ
URL: http://www.QandO.net

 
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