The Falling Federal Gas Tax

Both John McCain and Hillary Clinton propose a summer "holiday" from the federal gasoline tax, but did you know that this tax has been steadily falling in inflation adjusted dollars for the past 15 years?

The federal gas tax was last raised in 1993, from 14.1 cents a gallon to the current 18.4 cents. Adjusted for inflation, that makes our current tax the equivalent of only 12.4 cents a gallon in 1993 dollars. It is interesting to note that if in 1959, the year Congress established the National Highway Trust Fund, the then 4 cent tax was pegged to inflation, consumers would now be paying about 29.4 cents a gallon.

Still think our federal gas tax is unaffordable? Take a look at the US tax compared to a handful of other industrialized nations:

Country	Gas tax in US cents
Belgium	422
France	421
Germany	449
Italy	403
Japan	439
Netherlands	466
United Kingdom	471
United States	18.4

Even when you add in state and local taxes, US consumers are getting a relative bargain, paying a combined rate of only 39 cents a gallon on average.

At a time when our bridges are collapsing and many of our cities are clogged with congestion (not to mention gasoline consumption's impact on global warming and our blood-for-oil war in Iraq), it is hard to see how we can afford to keep the tax at the current historically low level, let alone suspend it entirely for a few months. Indeed, according to today's Seattle Post-Intelligencer, the gas tax holiday would cost Washington state alone about $126 million in lost federal funds... and more than 4,300 highway-related jobs. Meanwhile, according to the US Bureau of Labor Statistics, consumers could see little or no savings at the pump:

Historically, price changes for consumer gasoline have been driven by changes in supply as opposed to demand. In all recent cases, interruptions in the supply of crude petroleum resulted in significant increases in the prices of crude petroleum, wholesale gasoline, and consumer gasoline. However, changes in demand affected gasoline prices only marginally.

Since suspending the federal gas tax would do absolutely nothing to increase supply, and could actually increase demand, one can only assume that market forces will act to increase the retail price to fill the void.

That is, assuming you still choose to believe in all that crap they taught us in school about so-called "supply and demand."

[David Goldstein blogs on WA state politics at HorsesAss.org]

Comments

[Cathexis]

THANK YOU, Mr Goldstein.

Even if voters aren't required to take Econ 101, anyone who runs for office should be!

[joebaggadonuts]

Wow. Europe pays over 4 bucks of tax money for each gallon and they don't have to send their soldiers and treasure to the Middle East to keep it flowing. The Americans sure are getting cheap gas for their trillion dollar per five year war. Um, could you run those numbers again? How much fuel do these 4 plus tax dollar / gallon countries use vs how much do we use? A Trillion dollars on one side and 4K lives vs what? 4 bucks X however much gas /fuel the US uses. Seems like even if you value the lives at 400K each, the US citizen is paying less for his/her tank fill up. But let's check the numbers. From here: http://auto.howstuffworks.com/question417.htm we use 146 billion gallons of gasoline/year. Let's forget the diesel and jet fuel for now as you did not mention the tax costs of that for those nations. X5 is 730 billion gallons for five years. X4 bucks is 2.9 trillion dollars. Subtract out the 400K X 4K lives or 1.6 billion doesn't change this figure by a significant amount. So by this calculus, George's war is saving us money at the pump. Like it? Vote Republican. If OTOH, you think that having a balanced budget and a populace which is in sync with ethical policies of its national government is more important than cheap gas, make a different choice.

[Sciguy]

Sure, I believe in supply and demand! As in "SUPPLY me my gas, and I'll pay whatever price you DEMAND rather than support alternative fuels."

Oh, wait a minute... maybe you meant the OTHER supply and demand? The one that doesn't include collusion, monopolies, tax breaks, tax incentives, outsourcing, corporate whores writing government and economic policy, government whores taking corporate money...

[hopeless277]

Why do you hate Hillary? What has she ever done to you? I just don't see how this blog gets away with letting obviously biased posters write such hate-speech. The gas-tax holiday is a political stunt. Hillary has admitted that. It will also get her elected. AND THAT IS THE POINT. We Hillary supporters don't care how she gets into the White House. What she has to do or who she has to kill. We just want Hillary as president. Is that asking too much? So don't hate Hillary because when she gets to 1600, she'll remember who backed her and who didn't.

p.s. And so will Bill.

[Javalation]

A letter was signed by 230 leading economist against the stupid gas tax holiday idea, and how did Hillary respond? She has called them elitist and pressed on. This is very telling about the woman. She doesn't care what others think, even experts. She considers herself the smartest person around, and expects others to swallow her programs in their entirety with no compromise. How anyone can believe this is the leadership style that will bring us together, and take the country forward is beyond me.

[Aaror]

Um, Javalation­... I think hopeless was joking...