Federal gas tax 'holiday' is empty populist rhetoric

There's no good reason to suspend the federal gasoline tax this summer. But Illinois' sales tax on gasoline? That's a different story.

One of the worst public policy ideas being discussed these days, although one not likely to be approved by Congress, is to take a "holiday" from the 18.4-cent per gallon federal gasoline tax.

The idea is that temporarily suspending the tax would save motorists some money (an estimated $30 over the summer) and help the economy.

Yet it also would either cut into the highway trust fund which pays for much-needed infrastructure and mass transit, add to the federal budget deficit (Sen. John McCain wants to cover the trust fund money with general revenue) or – Sen. Hillary Clinton's plan – impose another windfall profits tax on oil companies. The first time that was tried, in 1980, it brought in less money than anticipated and resulted in decreased oil exploration – two good reasons not to try it again.

There's also no good reason to suspend the federal gasoline tax.

In the past we've supported suspending Illinois' sales tax on gasoline – and we would do so again this year. There's an important distinction. The federal gas tax is based on per-gallon sales which, during times like these, often ends up bringing in less money because motorists reduce their driving.

The state's sales tax on gasoline, on the other hand, is tied to price, meaning that Illinois motorists pay a double penalty with soaring gas prices. Retail prices are up and so is the amount motorists pay in sales taxes to the state and local governments. Here, government actually benefits the more its citizens have to pay for gasoline.

The gas tax holiday suggested by Sens. Clinton and McCain is just empty election-year rhetoric. At least we hope it is because it's awful public policy.

Comments