Sunday, April 27, 2008

Summertime Crude

A piece ran on Reuters this weekend about the different presidential candidates' views on suspending the federal gas tax for the summer to alleviate consumers' fuel price woes. John McCain and Hillary Clinton both are leaning towards suspension, while Barack Obama is wary, claiming suspending the fuel tax will save customers $25 for the entire summer suspension.

Other than scoring points with voters, what effects will a fuel tax suspension actually have?

The federal gas tax serves a pretty important purpose, functioning as a "user fee" for America's highways and roads, where those who use the most gasoline on them contribute the most towards their maintenance. Suspending the gas tax for any period of time means cutting off support for infrastructure at a time when state governments are bemoaning the lack of federal support for highway and bridge renovations. MSNBC ran a story last fall, stating that the Highway Trust Fund, the repository for monies collected from the federal gas tax and which allocates funds for highway projects nationwide, is due to run dry in 2009. While the nominal value of the gas tax has grown four-fold since 1970, the real value of the tax has been declining (i.e., not keeping up with inflation or increased fuel efficiency, which undercuts the mechanism of the tax), currently at about 3/4 its value in 1970.

If Senators McCain and Clinton want to push the U.S. towards a mass transit economy, this feels like a backhanded way to do it, where highways and roads will fall into disrepair and drivers will look for other ways to complete their commutes. If the goal is to save American taxpayers money, it looks like another "rob Paul to pay Peter" example, where taxpayers will save a little money now only to have to pay it later in the form of higher taxes to support infrastructure improvements... ones that will have to be performed as emergencies occur (as with the bridge collapse in Minnesota last year) because repair work wasn't being performed on schedule.

My wife has to gas up our car roughly once a week -- she commutes from East Austin to NW Austin. Given a weekly fill-up for our Honda Civic (which has a 10-gallon tank), costing roughly $3.50/gallon, each fill-up costs us in the neighborhood of $30-35 (assuming current prices). The federal gas tax is currently 18.4 cents per gallon. If the gas tax were lifted for the summer (June-August), we would save $1.84 per fill-up, or $22.08 for three months (12 fill-ups).

Personally, I'd rather the government keep collecting those pennies for infrastructure rehabilitation than granting me savings that will barely cover the cost of a tank of gas. Those pennies will do us all more good in the long run.

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