How Much Would You Actually Save With a Gas Tax “Holiday”?

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Drivers depend on gas tax revenue almost as much as they depend on gas.

The folks at Jabberwonk have put together a simple gas tax "holiday" calculator. Enter your car’s fuel efficiency and the miles you expect to drive, and the calculator spits out how much you would save this summer if the gas tax were suspended.

The formula assumes that the full 18.4 cents per gallon will be passed on to the consumer, an outcome most economists view as extremely unlikely. Even so, it’s difficult to come up with a scenario in which someone would save more than $100. But if you own a 16 mpg SUV and commute 50 miles each way, and drive 800 miles (roundtrip) for your vacation, that would do it. More likely, typical savings would work out to about $18 (and for many readers of this blog, probably zero).

Meanwhile, not content to let the gas tax holiday remain a pocketbook pander for the campaign trail, Hillary Clinton says she’s going to put the question to Congress. Is it savvy politics to keep this idea in the news cycle — running contrary to the experts’ consensus — or will voters sniff out a gimmick?

  • Spud Spudly

    Most voters will suck at that 18.4 cent teat like their lives depended on it and then ask for more. Seventy three percent of New York State residents favor a “reduction” of the state gas tax, according to Siena College:

    http://www.nypost.com/seven/05022008/news/regionalnews/oil_foils_summer_travels_109075.htm

  • vnm

    Hillary Clinton wants to reward SUV drivers at the expense of the rest of us? How is that commensurate with the Democratic Party Platform on the environment?

  • gecko

    Great picture!

  • brent

    What is infuriating is that sooner or later those lost revenues will need to come from somewhere. U.S. Secretary of Transportation Mary Peters has some ideas- http://www.streetsblog.org/2007/08/17/secretary-peters-says-bikes-are-not-transportation/

  • gecko

    From James Fallows in The Atlantic

    “Stupidest moment in policy ever?”

    http://jamesfallows.theatlantic.com/archives/2008/04/for_the_record_stupidest_momen.php

  • gecko

    James Fallows Gas Tax contest: “I will pay for a year’s subscription to the Atlantic for anyone who can come up with a more foolishly destructive bipartisan example.”

    http://jamesfallows.theatlantic.com/archives/2008/04/for_the_record_stupidest_momen.php

  • vnm

    The formula assumes that the full 18.4 cents per gallon will be passed on to the consumer, an outcome most economists view as extremely unlikely.

    Wait a minute, you mean that The Oil Companies will raise their prices to make up for the 18.4 cent reduction? In other words, Clinton and McCain want to give money to Big Oil at the same time they’re trying to tax their windfall profits?

    This is the dumbest thing I have ever heard.

  • d

    And even if the oil companies don’t actively raise their prices due to simple greed, the recent upward trend of gas prices would easily cut into that 18 cents savings before summer’s end. If oil started trading at $130 to $150 per gallon, gas prices would likely go up on their own, negating any rebate from the government.

  • gecko

    Dumber and dumbest.
    Of course, Hilary is just fight-hardening Obama for the looming onslaught of Republican tricks.

  • Mark Walker

    No gas taxes.

    Reduced funding for roads.

    Potholes.

    Bumpy rides, battered tires, broken axles.

    Desperate demands for better roads.

    New tolls on previously untolled roads.

    Those who can least afford to drive add to burgeoning demands for more public transit options.

    What’s not to like here? Go ahead — make my day — cut the gas tax to nothing, forever.

  • JF

    You missed it, Mark. The eliminated gas tax revenue will not result in reduced funding for roads.

  • It’s a big “screw you” from HIllary to anyone who cares about the environment.

  • Larry Littlefield

    Like I said, go ahead make my day. Eliminate the gas tax, and when the federal transportation trust fund is empty, eliminate federal transportation funding.

  • Mark Walker

    JF, re your link, you’re assuming McCain wins, and also that he’ll do what he says.

    I still think any shakeup in the funding for roads is a good thing, if only because it brings the issue out into the open. If roads have to be funded out of general tax revenue, they’ll have to compete directly with a lot of other priorities. Fill potholes or fill my prescriptions? I know which I’d prefer.

  • JF

    Mark, I assume nothing, I’m just reporting what McCain said. All three of the candidates are sitting senators, and if any “gas tax holiday” plan is implemented this summer, it will be whichever one can win over a congressional majority plus Bush’s signature. Not very likely, I know – but more likely than that the gas tax would be eliminated without the road funding stream made up from other sources.

  • Mark Walker

    JF, in the world we live in, road funding is assured, while transit funding is precarious.

    A world where they’re equally precarious would be an improvement, and that’s what the gas-tax elimination would accomplish.

    In the best of all possible worlds, road funding would be reduced and transit funding increased. My hopes for this hinge on a slowly emerging consciousness of the peak oil crisis.

  • My state, Indiana, suspended its gas tax a few years ago. Because of this stupid decision, from the late Gov. O’Bannon, Indiana was in debt millions of dollars until the state raised taxes. It seems almost stupid now, but people freaked out when gas rose to 1.50/gal. Not to disrespect the memory of the late governor, but he would probably be handing out money to people by now because of $3.75/gallon. It’s a stupid idea that doesn’t make a significant effect on anything. I won’t save that much money to make a significant difference and the government will have a shortfall. Which in the case of the federal gov’t is ok, since it can alway borrow more from China.

  • Julie

    Today in NC, Hillary was telling the voters about the Enron Loophole, which she is going to fix. Where has Hillary been? Congress has been discussing and doing nothing about the loophole for many years.

    Pres. Bill Clinton signed the law the created the Enron Loophole — Commodity Futures Modernization Act (CFMA), December 2000. John McCain’s financial advisor, Phil Gramm and his wife Wendy Gramm were the main individuals behind the passage of the CFMA. Wendy Gramm held the highest position at the Commodity Futures Trading Commission (CFTC). A few weeks after the CFMA passed, Wendy Gramm went to work at Enron.

    Prof. Michael Greenberger JD, professor at the School of Law, director of the Center for Health and Homeland Security, and a former director for trading and markets for the CFTC: “CFTC Is In Desperate Need Of New Commissioners Who Represent The Consumer Interest. Congress can pass all of the laws it wants to ensure that the energy derivatives markets are not overrun and made dysfunctional by excessive speculation. If the CFTC commissioners do not believe in those laws, the American consumer will continue to take a back (and highly uncomfortable) seat to the large banks, hedge funds, and other market speculators.”

    June 25, 2007 – Before the U.S. Permanent Subcommittee on Investigations of the Committee on Homeland Security and Governmental Affairs, Regarding, Excessive Speculation in the Natural Gas Futures Market. http://hsgac.senate.gov/_files/STMTGREENBERGERMichael.pdf

    Testimony of Michael Greenberger, May 8, 2006 – Senate Democratic Policy Committee Hearing “Lessons from Enron: An Oversight Hearing on Gas Prices and Energy Trading”: Consumers Have No Power at the CFTC, by Michael Greenberger, “Nothing has happened. Why? Because in the power politics of commodities business, the investment backs, the Goldman Sachs, the Morgan Stanleys, the City Banks, the JPMorgan Chase, run ICE. And the way business gets done at the CFTC is ‘Who has the power?’ Usually it’s the traders versus the consumers. And the consumers have no power at the CFTC. Here it’s a little exchange, or a fairly little exchange, versus the powers that be in the American financial community. And in that calculus, ICE is going to get away with murder. Simply put, that’s what’s happening. http://democrats.senate.gov/dpc/hearings/hearing31/greenberger.pdf

    Phil Gramm, Bill Clinton, and the Sub-Prime Financial Mess
    Listen to Michael Greenberger on NPR’s Fresh Air http://www.npr.org/templates/story/story.php?storyId=89338743

    Senate Investigations Permanent Subcmte. Hearing on Excessive Speculation In The Natural Gas Market, Part 1 of 2
    Speaker: Corbin, Cota, Kaminski, Greenberger, Lee, Levin
    Date:06/25/2007 http://video.energypolicytv.com/displaypage.php?vkey=1b6b7a7d29490fe5ec9f&from_search=1

    Does anyone in the current administration even remember Enron, June 26, 2002 | Does anyone in the current administration even remember Enron? Judging by President Bush’s two nominees to the Commodity Futures Trading Commission (CFTC), who appeared at Senate hearings on Tuesday, the answer is no. Prof. Michael Greenberger

    The CFTC, Reluctant Regulator, 11/26/2003, TheStreet.com, by Will Swarts

  • Larry Littlefield

    I suppose nobody’s perfect.

    While Obama refused to pander to the privileged on the gas tax, the New York Times reports he has proposed exempting senior citizens earning less than $50,000 from federal income taxes, while continuing to tax younger people with the same income.

    Those who do not work are already exempt from payroll taxes, for benefits likely to be much reduced for younger generations.

    Read this and tell me if you think this is a good idea.

    http://www.r8ny.com/blog/larry_littlefield/taxes_generational_equity_redux.html

    It seems that older generations want to stick it to younger generations, and the politics is about how.

    Tax cuts for the wealthy and rising debts? Letting the infrastructure and environment go to hell? Mostly Republican.

    Pension enrichmments for those cashing in and moving out and lower compensation for young employees? Special tax breaks for seniors? Mostly Democrat.

    In NY State, both do them all.

  • Jim

    Hillary Clinton, the senator from New York, is not likely to implement the needed control to stop speculative gas trading to protect the “New York” investment backs, the Goldman Sachs, the Morgan Stanleys, the City Banks, the JPMorgan Chase.

    Senator Obama has said that he supports additional regulation and oversight over the financial institutions that caused the subprime housing mess that is greatly harming our economy.

  • Today I recieved an email from my State Senator that he was introducing a measure to repeal the state gas tax of 32c, i wrote him the following email in response –

    Dear Senator Padavan,
    I am very appreciative of your efforts on behalf of our neighborhood.

    Personally, however, i believe a temporary repeal of a gas tax would be ill advised. The reason gas prices are high is not because of a 32c tax. Rather these high prices are due to the denizens of developing countries (like China and India) are starting to live a lifestyle similar to our own, and the fact that non-OPEC countries (like Russia, and Mexico) are either running out of oil or for whatever reason not exploring for new fields. (Furthermore even if new fields were to be setup such as the ANWR field, these would take 5-10 years to come online, so that does nothing in the short term)

    There have been reports that oil may reach 200$ a barrel and 7-8$ a gallon by NEXT YEAR.

    This is simply supply and demand, there isn’t enough supply and demand will continue to rise in developing countries. A 32 cent decrease in gas prices would probably just encourage people to drive not conserve. This would only exacerbate the problem.

    I have a suggestion Senator, why not encourage people to conserve? This can be done in the following ways:

    1. Get more funds to the MTA. The MTA is talking about shutting down service on some lines at night this obviously won’t be good for conservation in NYC. Albany has consistently underfunded the MTA, its time the MTA got its’ fair share of money.

    2. High Speed Rail. (Not Acela Speeds mind you, TGV and Shinkansen Speeds of around 300mph) This is a pet project of Joe Bruno’s I understand, yet it hasn’t progressed very much. Typically everyone thinks these are good projects but there’s never any money for this. I have a suggestion. Texas Governor Rick Perry has suggested building a super corridor North-South in Texas to carry, highway, rail, internet, electricity, and oil. Why not do something along the same line? Create a state entity with the power of eminent domain to purchase land to carry electricity, rail and internet traffic. There are power companies who want to buy land to bring power to NYC and LI and after the Northeast Blackout of 2003, Congress has essentially made it much easier for these power companies to build the transmission systems they want. Why not funnel their efforts and money into purchasing the land needed for such a project. This will essentially remove the need for much public monies to build the Right-of-Way, all that would be needed once the ROW was established would be for the rails to be laid, a much easier task financially than the state bankrolling both the purchase of the ROW and the laying down of new rail. Since High Speed Rail will in all likelihood take up energy anyway it makes sense for it to be next to electrical transmission systems. New York is unique amongst the states because our population centers are largely centered along the route of the Erie Canal and the Hudson River, and is thus the best candidate for a full fledged European style High Speed Rail system. As long as we are building this super corridor, add internet transmission so that the whole state is linked via a so-called “fat pipe”. Once Internet 2.0 comes online, New York will be ready. Basically, Senator Padavan, I am asking you to be the 21st century’s DeWitt Clinton and have the vision to build the 21st Century equivalent of the Erie Canal. This will probably do more in the long term to reduce the carbon footprint of the whole state than anything else we can do. Imagine people being able to travel by train from Albany to NYC in less than one hour, or Albany to Buffalo in a little over an hour, or from Albany to Montreal in an hour. That would simultaneously stimulate both the upstate and downstate economies and cut dependence on cars to travel these routes.

    3. Don’t just encourage, but give all New Yorkers real incentives to install solar panels. Right now installing solar panels is not economically feasible for most home owners, rather it’s quite cost prohibitive. The tax rebates the state offers home owners are simply not enough to encourage most home owners to install them. This is probably due to the fact that people don’t hold on to their homes long enough to realize the financial benefits of having enough solar panels to be “off the grid”.
    For instance an average house in my neighborhood is going to need about $30,000 of solar panels to completely go “off the grid” the state needs to take this into consideration when coming up with inducements to go solar. One possible route might be the way that Germany has essentially encouraged people to become solar farmers through a very unique program. (People are guaranteed the power companies will buy their power at a given rate for X number of years).

    On an island such as our own, where we import the majority of our energy from other places and the majority of us live in single or two family houses which are easily solarized, it makes sense for us to be more energy independent, and by encouraging people to get enough solar panels that they are totally off the grid, this would actually do a lot more to drive down demand, than probably anything we can do to keep prices down.

    4. Couldn’t we add a sales tax on vehicles which aren’t fuel efficient? Why don’t people who drive big SUV’s pay more? A hog tax if that’s possible Most of the time, I see an SUV there is just one person in the vehicle. So I don’t think I’ll be persuaded by the big family/soccer mom arguments, most people drive an SUV because they can, not because they need to.

    The reality senator, is that high prices are here to stay and in all likelihood will increase. Albany needs to show leadership and encourage New Yorkers to conserve, and further figure out ways to prepare New York’s economy for a future where energy prices will in all likelihood be much higher.

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