Wednesday, April 30, 2008

Effect: Windfall Tax and Gas Tax Holiday

McCain wants to suspend the gas tax for 6 months.
Effects: Gas sales will plummet prior to the start of the holiday, and lines will form at some pumps as soon as the holiday starts. If you don't think it worthwhile to wait in line to save 18.4 cents on a gallon of gas, you should consider filling up the tank prior to the start of the holiday. We'll probably see the same thing to a lesser extent at the end of the holiday, with people filling up prior to the cutoff date.

Obama wants to impose a windfall tax.
Effects: It may gratify some people to gnaw at the hand that feeds them. But limiting the profits that oil companies make off of gasoline sales will reduce their incentive to produce and thus reduce the supply of gasoline. This would lead to shortage, higher prices, or both.

Clinton wants to pay for the tax holiday with the windfall tax.
Effects: In a best case scenario, oil companies simply make up the lost revenue by increasing pump prices. Motorists end up paying the same amount for gas, oil company revenues stay intact, and government income stays the same while government spending continues to increase. This might be the best plan of all, in that it might not have any net negative effects and the potentially positive effect of being a waste of Congress' time.

Libertarian views on the gas tax: Some Libertarians feel that the government has a right to tax gasoline as long as the money is used to construct and maintain roads. I personally think that roads should be funded by vehicle registration fees, since there are people who use gasoline powered equipment but do not drive. We all agree that only people who use roads should pay for them.

1 comment:

Bernie's Dad said...
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