A blog for better streets and public spaces in Portland, Maine.

Monday, April 28, 2008

Gas tax "holidays" lead to gas price hangovers - so bring it on!

Two thirds of our presidential candidates are now pandering to the electorate with promises of a gas tax "holiday" - a temporary moritorium on federal fuel tax collection that "would shave 18.4 cents off the per-gallon price of gas and 24.4 cents off diesel," according to the Dallas Morning News. To put that savings in perspective, gas prices have risen 42 cents since January.

If you're interested in lowering the price of gas in the long term, this is a horrible idea. It will also severely deplete the federal highway fund, which doles out money for road projects nationwide. For these reasons, I wholeheartedly support the concept.

Economists have railed against this plan because it won't actually do anything in the long term about gas prices - in fact, it's actually going to make matters worse. Rising prices ought to give people the message that they need to make the changes they need to make in order to consume less gasoline. Eventually, slackening demand will cause prices to stop rising. Some commodities experts estimate that this may happen when the price of gas tops out at about $10 a gallon (see this New York Sun article).

But if the government meddles in the meantime, Americans won't be as inclined to conserve, which means that gas prices will continue to rise, and at a faster rate than they would without the tax "holiday." And when the "holiday" invariably ends, motorists will be whammied with a sudden 20 cent jump in prices. So a summer-long gas tax holiday seems like a great way to guarantee $5 a gallon gasoline just in time for the fall hurricane season.

At the same time, the federal government's highway fund will lose billions of dollars for every month of gas tax vacationing - which also means that the federal capacity to fund new highway and road projects will wither away just as rapidly. And so the odds of expanding I-295 in Portland and building a second Gorham Bypass continue to diminish. Awesome!

Last night, a bunch of Maine truckers drove their rigs 800 miles to protest in D.C. At about 10 miles to the gallon, each truck spent over $300 for the one-way trip (not including engine wear and the opportunity costs of lost revenue). It probably wouldn't make them feel any better to point out that they could have spent less than half the money for a train or bus ride to Washington...

No comments: