John McCain and Hillary Clinton have got a great idea. To help families making those summer roadtrips, they propose a summer Gas Tax Holiday. Its so politically expedient, such a clear example of campaign pandering, that it makes my head hurt. It’s just another example of politicians telling folks what they think they want to hear, and not really providing solutions. Here’s why its such a bad idea.
And what one elitist politician thinks of it:
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May 2, 2008 at 1:45 pm
I’m all for the tax abatement, but not because I agree with Clinton or McCain. I’d like to see a permanent end to the excise tax as well as a permanent end to ALL tax credits * oil or solar or wind or cow fart
methane. Unlike Friedman, I think tax credits of any kind are an abomination. Subsidies are the worst form of taxation. Even if we think it’s for a “good” cause. For how do we expect recipients to be anything but unfairly profitable and the government to be anything but self-interested?
The last thing Americans need is any kind of “relief” from high gas prices. We need “relief” from unnecessary taxation and we need “relief” from Middle-Eastern oil.
If we want to really re-imagine our communities in a less oil-dependent way, we have to stop worrying about tax strategies and energy policies. All we need to do is end our futile fight for an increased oil supply from the Middle East.
May 3, 2008 at 1:09 pm
I suppose you have stronger faith in the market than I do. Taxes and tax credits help shape business behavior and provide public goods that the market fails to produce. Tax credits are vital to breaking down barriers for alternative energy to compete against oil. Unless there is an energy provider that can compete with oil, I don’t think we will see “relief from Middle-Eastern oil” any time soon. It will take more than just withdrawing from Iraq to solve this problem.
May 5, 2008 at 12:02 pm
Ahh – I wish there was a way we could discuss this at length
But here’s a quick response:
I think the greatest barrier to entry for alternative energy companies is the favoritism and protection Congress affords the oil companies. USA protects oil and their profits with big guns. And in so doing they are shaping business and consumer behavior adversely.
You’re right, we need more than a withdrawal from Iraq – and I may be holding onto unrealistic expectations.
I think most energy consumers are willing to move away from oil and that the market would eventually prevail – without someone else under the sheets in Washington.
Tax credits are only beneficial to companies already showing a profit. Startups show losses for the first few years and therefore tax credits wouldn’t apply against any tax liability. They don’t do much in the way of infusing capital.
May 6, 2008 at 9:35 pm
The question lies in where does the money come from if we get rid of the excise tax. If we do away with the tax then do we do away with what we are spending that tax money on? Does that lead to more highways in disrepair and more construction workers out of a job? Does that lead to less consumer spending because they do not have jobs and a downward economic spiral? On the other hand does the lack of tax lead to more money for consumers to spend on other products and thus an increase in consumer confidence? Does this newfound consumer confidence lead to more spending thus more production thus more employment and a recovery?
In the end the only thing that will ultimately lead “new energy alternatives” is profitability. The only way that occurs is if oil becomes so expensive that alternative energy sources become a viable economic alternative. People will not buy hybrid cars in mass for example until the become a “bargain” in the end. We have not reached that point yet but if gas prices continue to increase then the economic idea that the market will not leave money on the table will result in existing companies (not necessarily new ones) investing in alternative energy. They will invest in it not because it’s better for the environment or an other altruistic notion but because it will make them money.
In the end who is to blame for gas prices. In my opinion it’s not the oil companies plotting to supply less, it’s the investors speculating that the demand for oil futures will only increase. It is this rewarded speculation that leads to the cost-push inflation that is so crippling. Eventually this “bubble” will burst and the upward price structure will subside but probably not an time soon. The market has a way of correcting itself eventually to some degree. Just ask the people who are trying to sell houses in California.
Very poorly written comment but hopefully you get my point.