The Gas Tax “Holiday”

May 2, 2008

The idea of a gas tax “holiday” is now prominent in the presidential race but is gaining little traction in Congress. William Gale says that giving drivers a summer break from gas taxes may have political legs but will not help consumers at the pump. What is needed, Gale says, is a serious debate about the real issues.


“I would not be surprised if the proposal for a summer suspension of the gas tax has some political legs. Indeed I think that’s why it came up in the first place. Certainly the western states are very anti-gas tax and I imagine that the presidential candidates are kowtowing to those concerns. Congress could very well kowtow to the same concerns. But in either case it would be bad economics.

“The second reason that a reduction in gasoline taxes during the summer is bad economics is that it will not help consumers at the pump. It will not even achieve its intended goals even though its intended goals are not so ideal to begin with.

“The reason it will not help consumers is that supply of gasoline in the summer is at its capacity so if you reduce the tax all you do is increase the amount that goes to the oil companies. You don’t reduce the cost to the consumer.

“What I would like to see in the election is a serious debate of the real issues. We’re so far away from that across the board—whether its fiscal policy, tax policy, infrastructure, energy policy, health policy and so on. The level of the debate is very disappointing and I think the candidates would be doing themselves and the country a favor if they started talking about the real issues.

“The argument that people give is “well you don’t want to talk about that during the campaign because it’s too complicated or voters might not buy in to it.” But whoever comes into the White House in ‘09 is going to face a whole host of issues they need to deal with right from the get-go and if they haven’t campaigned on those issues they won’t have any mandate they can call in and they won’t get anything done.

“So the cost of running a campaign that does not address the real issues is that once they get into the White House, whoever it is, they won’t have a mandate to actually do anything on the real issues.”