Wednesday, April 30, 2008

gas taxes and basic economics

Riddle me this, John McCain, Hillary Clinton, and Jill Long Thompson:

After you dispense with the gas tax, thus lowering the price some $.18, what's to stop the oil companies from raising the price back to where it was before and pocketing that 18 cents for themselves?

I'm not the only one wondering. Paul Krugman:
Why doesn’t cutting the gas tax this summer make sense? It’s Econ 101 tax incidence theory: if the supply of a good is more or less unresponsive to the price, the price to consumers will always rise until the quantity demanded falls to match the quantity supplied. Cut taxes, and all that happens is that the pretax price rises by the same amount. The McCain gas tax plan is a giveaway to oil companies, disguised as a gift to consumers.
The Clinton twist is that she proposes paying for the revenue loss with an excess profits tax on oil companies. In one pocket, out the other. So it’s pointless, not evil. But it is pointless, and disappointing.

Meanwhile, Tom Friedman is apoplectic at the very suggestion of a holiday and what it says about our long-term priorities.

Hey Hoosiers: before you let the gas tax holiday sell you on these clowns, consider that the gas tax fuels (no pun intended) the highway trust fund, which is used by states and localities to build and maintain roads. How were your potholes this winter? Your snow plowing? De-icing? What if next winter is as bad as this past one? Would you rather have your snow plowed and your pot holes filled like last year or would you rather save 18 cents on the gallon at the pump?

You can't have both.

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