Don’t Cut the Gas Tax for Summer Holidays, Double It

By :: May 27th, 2011

I woke up yesterday morning to news that the Comptroller of Maryland is urging the state to eliminate its 23.5 cent gas tax for all holiday weekends this summer. The comptroller, Democrat Peter Franchot, has made no secret of his political ambitions and this scheme will surely win him votes.  But it is terrible tax policy.  

Franchot acknowledges his gas tax holiday would reduce state revenues by about $2 million-a-day. Maryland, it happens, faces a $1.4 billion budget shortfall for 2012. So why would he propose this? It would, he insists, “be a big boost for the state's economy and most of all, it would just give our citizens a break."

I have seen no evidence that the former is true. It may be that lower gasoline prices over an extended period can boost the national economy. But would lowering prices for 2-3 days improve a state’s economy? I don’t think so.

Would a gas tax holiday “give citizens a break?”  Sure, but perhaps less of one than Franchot hopes. Joseph J. Doyle and Krislert Samphantharak  found that gas stations will pass on some—but not all—of a temporary tax cut to customers. Once the tax holiday ends, gas prices may be higher than before the tax. So yes, people will get something of a break. But not a huge one.  And it may not last long.

Keep in mind that even if the entire tax cut were passed on, a typical driver might save about four bucks on a tank of gas. The bigger your gas-guzzler, of course, the more you save--though I am not sure that is Franchot’s intent.  

How about his other claim? Would a gas tax holiday really boost the state’s economy?

A few interstate drivers might delay buying gas for a few miles to take advantage of Maryland’s lower prices—if they even knew about them. And perhaps they’d buy a bag of chips while they were taking a break. Otherwise, it is hard to see much new economic activity from out-of-staters.

Just think about it for a minute: People make summer vacation plans months in advance. Would they really change beach houses to save $4.00?  

And if they did, this hair-brained idea might actually encourage Marylanders to spend more of their money out-of-state rather than at home.  Maryland is a small state and if lower gas prices spurred people to drive longer distances for their vacations, Marylanders might end up buying more in Pennsylvania or Virginia. If Franchot really wants to encourage Marylanders to stay closer to home and spend their money at the local mall, he should raise holiday gas taxes and prices, not lower them.  

Then there is the matter of timing. If I am running low on July 3, I might wait to the 4th to fill up so I can take advantage of the tax holiday. The state loses $2 million, but nothing else has changed.  In fact, if I was really running on fumes on the 3rd, I might curtail my driving (and other economic activity) for a day so I could make it to the 4th.

Worst of all, though, is the policy signal Franchot is sending. Any sensible government official with an eye on economic, environmental, and geopolitical issues should want to discourage consumption of oil. Instead, he is pandering to those who want to consume more.  And, by doing so, he would cost his cash-strapped state millions of desperately-needed dollars.

Maryland and the nation would be a lot better off if politicians such as Franchot doubled the gas tax on holiday weekends, rather than eliminating it.  Congrats to Maryland Comptroller Peter Franchot for the dumbest tax idea of the week.

15Comments

  1. Michael Bindner  ::  1:52 pm on May 27th, 2011:

    Gas taxes need to go up, or better yet be set a a fixed percentage rather than a fixed excise. The feds should do this too.

    The last I checked air pollution and warming levels, we need less driving, not more. The last time I drove, I noted we need more road repair – especially given the effect of the snows we have on roads.

  2. Michael Bindner  ::  1:53 pm on May 27th, 2011:

    We also need to use gas taxes to build more rail.

  3. Jack B  ::  8:26 am on May 28th, 2011:

    Apparently, Mr. Peter Franchot didn’t learn anything from the first time homebuyer credit fiasco. How did that workout?

  4. ConservativeNotRepublican  ::  12:07 pm on May 30th, 2011:

    Are people at the Chrisitan Science Monitor really this damned stupid??

  5. ConservativeNotRepublican  ::  12:09 pm on May 30th, 2011:

    I should have been more specific. Is Howard Gleckman really this damned stupid. Apologies to the CSM.

  6. Curly4  ::  12:26 pm on May 30th, 2011:

    Maybe each state should take Howard Gleckman’s Idea of “Don’t Cut the Gas Tax for Summer Holidays, Double It” and implement it. Look what a boon for the state’s coffers! Each state could also blame Howard for the higher price. I do think as the price of gasoline declines some states and cities may look into quietly increasing their tax on gasoline. And they can blame it on the oil companies too.

  7. Curly4  ::  12:29 pm on May 30th, 2011:

    After you build more rail with the gas tax who then is going to keep it up, the riders? No way! It will fall on the taxpayers not the riders.

  8. Curly4  ::  12:30 pm on May 30th, 2011:

    Nobody says that you can’t ride mass transportation!

  9. George  ::  1:20 am on May 31st, 2011:

    Agreed, states cannot afford to lose the tax revenue. Of course, they could always offset this loss by undoing other absurd subsidies and low tax rates for people whose income is so high that $4 gas does nothing to cramp their lifestyle. The rest of us have to get to work every day and pay for the rise in cost of everything as people lump increased shipping and production cost into their finished goods.

  10. George  ::  1:21 am on May 31st, 2011:

    Either you are blessed to live in a metro with a good transit system or have never tried to commute this way. Assuming your employer is flexible enough to accomodate to the transit schedule, they you have to hope to God they are close enough to a route that you can actually get there. Our nation’s infrastructure is built on cars, plain and simple. Woe be to the people who doesn’t have one.

  11. Ed  ::  7:23 am on May 31st, 2011:

    What if you can’t afford to even buy groceries?

  12. Michael Bindner  ::  9:20 pm on May 31st, 2011:

    Yes, and do not the riders benefit from less congestion on the roads because those who can take the train, do so?

  13. Michael Bindner  ::  9:21 pm on May 31st, 2011:

    Buses don’t like potholes either.

  14. Alan  ::  10:35 pm on June 7th, 2011:

    Here’s the problem: In theory it sounds good, raise the gas tax and people conserve and buy energy efficient cars, less pollution, less reliance on oil from overseas, more use of public transportation, etc. Except here’s what happens: The price goes up and people with money, people who drive big vehicles, thirty plus foot motorhomes that get 6 mpg and cost a hundred grand, drive just as much as they did before. They do not bat an eye. Grandma, in the meantime, on a fixed income and already driving a 2002 Honda Civic, and doesn’t dare hop the city bus (if there even is one where she lives) has to decide whether to pay for her medicine or put gas in the car so she can go to the grocery store. Folks in the big city can just decide to walk to the grocery store two or three blocks away, while poor rural folk try to figure out how they are going to afford to drive 50 or 100 miles round trip to the nearest grocery store, while they can only dream about “public” transportation. Buying a new “energy efficient” car is a bad joke for many, especially if out of work or on a fixed income. If you are going to ration, then ration. Everybody gets the same amount, or can only buy on odd or even days like they did before. Don’t deny the poor (or even some so-called “middle class”) the basic ability to conduct their lives, while the rich shrug off more expensive gas and continue to tool around in their Hummers and RV’s. It wouldn’t be Christian, Christian Science Monitor!

  15. Alan  ::  11:20 pm on June 7th, 2011:

    Except, of course, if it doesn’t exist where you live. Try taking mass transit if you live in rural Montana and it’s 70 miles to the nearest grocery store or doctor.