THE BLOG
05/06/2008 12:08 pm ET Updated May 25, 2011

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]