John McCain Wrong on the Gas Tax

John McCain is my guy, in spite of his imperfections. I’ve described his weaknesses in science and health care before. Here’s another one: John McCain wants to lower the gas tax (hat-tip to TPMCafe).

McCain urged Congress to institute a “gas-tax holiday” by suspending the 18.4 cent federal gas tax and 24.4 cent diesel tax from Memorial Day to Labor Day. He also renewed his call for the United States to stop adding to the Strategic Petroleum Reserve and thus lessen to some extent the worldwide demand for oil.

At the very point when the market is sending signals to consumers to buy more fuel efficient vehicles and the United States Treasury is increasing its borrowing to fund McCain’s War surge, McCain want to make gas cheaper so people will keep buying SUV’s and cut income to the Treasury so we will have to borrow more from the Chinese government. Back in February during a Republican Debate, McCain said he was going to cut wasteful spending so much that we would no longer have to borrow from the Chinese. He’s a magician!

Instead, we should raise the gas tax. As I mentioned in one of my first post, $5/gallon is a reasonable place to start the discussion.

17 thoughts on “John McCain Wrong on the Gas Tax”

  1. Straight-talking McCain, pandering to voters? NO WAY.

    Increasing the gas tax is a reasonable way to decrease gas consumption, but another component I think needs to be federally-mandated efficiency standards. Maybe not make cars with low fuel-efficiency illegal, just tax the hell out of them when they are sold (raise the tax as alternatives come to market). You could make a killing selling a hybrid pickup if regular pickups are taxed an extra $10,000 at purchase. It would achieve the same result without squeezing poor people.

  2. David Brooks once said John McCain panders terribly. I’d agree… this is flat-out dumb and we do need $5 a gallon gas, much as my wallet would cry over that.

    Now a better idea might be a $1000 tax rebate over the summer for Americans who buy hybrids or solar or wind power equipment to power their homes.

  3. Increasing cost of utilities will decrease the quality of life – and that includes the cost of gasoline. Five dollar a gallon gas may be coming, but it is not a good thing.

    Your Mom

  4. Do we have any knowledge as to what remaining boundaries federal and state governments have in place to a free marker for alternative fuel and energy sources? Perhaps a citizen’s pressure campaign could institute political pressure to remove these so as to give this urgent issue the full resources it deserves.
    Further, tax breaks for oil companies should be revoked and instead provided to local and regional firms specializing in maximizing and improving solar, wind and switchgrass energy sources.

    Granted, back to basics, Mother of TDAXP has an important point. As people pay more for gas and food, they are buying less (hurting the economy), having to budget (or budget more tightly) and perhaps also saving less. That can’t be good except for the budget part.

  5. McCain knows that Congess will not pass anthing like that in the next 60 days or ever as long as it would enhance him one iota. So it is a safe still-born promise that earns him points without risk.

    I agree a tax on Gross vehicle weight or engine size would be more efficient in encouraging downsizing.

  6. “they are buying less (hurting the economy” which I think is the whole point of it, Eddie. McCain’s a sorta-kinda ‘voodoo economoics’ guy. If you look at it from that perspective it isn’t pandering so much as it is an attempt to spur people on to do more spending(that whole Keynesian economics thing).

    Of course, I don’t think it’ll a) happen b) work(consumer confidence is in the toilet, they aren’t going to spend).

    I just love the line I’m seeing here: it’s hurting me so let’s pass the buck(get people with larger vehicles, etc). Sigh, if that isn’t robbing Peter to pay Paul(hey, I drive a 4 cylinder car, and before that my other car was a 4 cylinder 2dr). Consumption taxes don’t seem to work, imo(sure has done a lot to discourage smoking ain’t it?). Not the way to go. You want to get real change in what powers a vehicle? Do what worked in the past: get car racing people in on it. Everything from disc brakes to fuel injection came out of that. You make it worth F1 or NASCAR’s sponsors time to back this, and it’ll happen faster then any kind of gov’t intervention plan will.

    There’s a lot of places we can go into this about economy(hell, why do people live on two incomes? They don’t really need to, not to survive. It feeds their consumptive practices, so let’s just tax the bejesus out of the second income, that’ll teach ’em). Some of this is silly, imo.

  7. To clarify, my plan is to rebate the gas-tax payments directly to the American people. So anyone who pays less than average for gas ends up making money on the plan. The gas tax shouldn’t be used as a source of governmental revenue, but as a method of decreasing oil consumption.

  8. McCain wants to cut gas prices when families are going on road trips and vacations, when they will notice it.

    Since this is only part of the year, the incentive to improve mileage for the routine work-related travel is still in place. This seems like a pretty good balance betweent he policy goal and populism. He could have said repeal it entirely.

  9. I just thought you meant that if $5/gal was what the market said it was worth then that’s what we should pay and budget for accordingly, Dan. It will cause a re-establishment of what people can and cannot afford, and that’ll be painful. But so many are living on margin anyways. If it wasn’t gas it’d be loan crunches(both of which are happening).

    And is this a blogging first? Getting called on the carpet by one’s mom?

    Quite honestly, I think the best thing to do is nothing. Let people figure it out on their own. Trying to save them with gov’t programs is bound to make more problems than it is worth right now(unless we’re talking about somehting like the Tennessee Valley project or massive road building exercises ala the 30s).

    Economic re-adjustments *do* happen and that isn’t a bad thing, in the long run.

  10. ry,

    The purpose is to lesson the political power that oil producing regimes have over us, and to lesson the power that oil has over those regimes. The market price isn’t much of an issue.

    Lexington,

    Good point.

  11. BUt influence runs both ways, doesn’t it?

    I’m not sure a crash program works toward our goals here—lessening negative influences while maintaining positive ones. Isn’t one of Barnett’s best points that a cold turkey approach is very destabilizing to the ME and that it simply increases resentment there by going quickly away from petroleum?(A hacked his caboose break on this, but I hope you know where I’m trying to go).

  12. Rather than cutting the 18.4 cent gasoline tax, a much more effective way to lower gasoline prices would be to eliminate the dozens of different federal gasoline formulation requirements. The EPA has divided the United States up into many different areas for selling different types of gasoline. It is illegal to sell gasoline blended for one area in a different area. The result of this is that the refineries and terminals never get it exactly right in predicting how much gasoline is going to be sold in each area in each month. That means that there are always spot shortages which lead to local price hikes.

    The way around this is to make gasoline a fungible commodity again. The EPA should come up with ONE required gasoline formulation. It will be more stringent than many rural areas need but it will be less stringent than some urban areas currently have. The result is that any gasoline can be shipped to any gas station and spot shortages will be eliminated. This would probably drop the price of gasoline by more than 18.4 cents nation wide.

    From a political standpoint, the problem with doing this is that it is too complicated for a sound bite but cutting the gas tax is simple and everybody can understand it.

  13. ry,

    Barnett makes the point that if not for Oil, our relationship with the Greater Middle East would be similar to our relationship to Sub-Saharan Africa.

    I agree.

    The difference is that he takes this as an argument for oil-wealth, and I take it as an argument against.

    Asian colonization will be a lot easier to institute in SSA than GME because it is not complicated by black gold, and the social degeneration that comes with it.

    Mark in Texas,

    Interesting!

    Are refineries forced to formulate gasoline for their local standards, or can they chose to formulate for the higher standard of another part of the country?

  14. Refineries can make any formulation that they want. Since such a large fraction of US refineries are on the Gulf Coast, it would not make sense to require them to only make gasoline to local standards while other areas without refineries would be unable to obtain gasoline.

    The thing is that there are dozens of different gasoline formulations required for different areas due to EPA fiat. There are also state and local regulations which often complicate matters. That is one of the reasons that gasoline costs more in California. The refineries have to guess in advance how much gasoline is going to be purchased in each zone, produce that gasoline, ship it to the area and then change the formulation for the next zone, ship that quantity there, etc…

    If they guess wrong and produce too much for an area, the excess inventory sits there wasting capital that has interest cost. If they guess wrong and produce too little gasoline for an area, it takes a while before that information feeds back to the refinery, the production schedule can be altered the different mix can be produced and delivered. In the mean time, there is a shortage of gasoline in that area so local prices go up. There is the additional complication of stricter volatility standards for the summer months which essentially doubles the number of required formulations and makes it illegal to sell “winter gasoline” during the “summer gasoline” months.

    All this stuff adds to the cost of gasoline. How much extra do these regulations add to the cost of gasoline? I don’t know. It would take a talented economist to figure it out. Given the orthodoxy required on any matter related to the environment, I don’t expect any honest analysis from academia. Is it worth the extra cost due to improved air quality? I genuinely do not believe that anybody has any interest in providing an honest answer to that question.

  15. Mark in Texas,

    Thanks for the info!

    The thing is that there are dozens of different gasoline formulations required for different areas due to EPA fiat. There are also state and local regulations which often complicate matters.

    As a tangent, this brings up the tension of federalism v. states rights, with the European Union (I almost said federal republic, heh) often being more centralized than the United States.

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