Gas Tax Pandering

It’s hard to know where to start with this one. John McCain at least openly acknowledges that economics isn’t his strong suit. Senator Kyl, I would have thought, would know better. Pure pandering.

Here we are in the midst of a big brown-cloud and ozone non-attainment season, and our two senators are endorsing a plan to increase the amount to gasoline and diesel consumed. Vehicle emissions in Maricopa county (the Phoenix metropolitan area) are the primary contributor to smog.

As if that’s not bad enough, the shortfall — the amount that would have been collected during the “holiday” — will be made up from general revenue. Which is to say, car use will be (further) subsidized by taxes unrelated to driving, like the income tax, or will simply make the federal deficit larger. This sets up exactly the wrong incentives– you will get more driving and less useful economic activity.

From a economic policy perspective, a much better stimulus would be to have some sort of “holiday” on payroll taxes. These taxes are a direct tax on labor, and hit lower-wage earners particularly hard.

“…John McCain proposed a ‘gas tax holiday’ that would suspend federal levies between Memorial Day and Labor Day… His Arizona colleague, Jon Kyl, promptly introduced it as Senate legislation”

“The 18.4 cent tax per gallon of gas (24.4 cents for diesel) funds interstate highway repairs and other transit needs, though general revenue would offset losses from the moratorium.”

— Global Warming Holiday, WSJ April 25, 2008. (emphasis added)

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