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6/23/00 12:25 p.m.
Buckeye Gas Pains
Mr. Taft, bring down that tax!

By Kevin Holtsberry, freelance writer based in Ohio

he "gas crisis" here in the Midwest is making for strange politics. Indiana's Democratic governor, Frank O'Bannon, suspended his state's sales tax on gasoline, and now Ohio Democrats are calling for Ohio's Republican governor, Bob Taft, to do something. Democrats calling for tax breaks and Republicans resisting? They don't call it the silly season for nothing.

Ohio's Democratic leadership, looking for an issue to rally around as they head toward November, are hitting Taft in an awkward spot: taxes. A couple of months ago, the momentum was building for across-the-board permanent tax cuts. Governor Taft urged caution, reminding legislators of the potential for a negative school-funding ruling to wreak havoc with the state budget. When just such a ruling came down in May, Taft was able to hold off permanent tax cuts by supporting a rollback of the Ohio estate tax. Taft and the Republican leadership also were quick to point out that a tax increase was off the table, despite the court's ruling. The governor thought he had put taxes to bed for the summer break — until gas prices started soaring.

The soaring prices in Ohio created quite a shock; the morning of June 8, gas was $1.39 a gallon, that afternoon it was $1.89, and it didn't stop there. In areas across the Midwest, prices broke $2 a gallon. People began to complain and politicians reacted. Democrats and Republicans alike outlined plans to memorialize Congress and the President to act; investigations were demanded. As prices climbed — with no relief in sight — this week, the pressure intensified. When Governor O'Bannon suspended sales taxes on gasoline, the inevitable question arose: "If Indiana, why not Ohio?" Democrats here voiced this very question yesterday.

The Democrats' argument is simple: Ohio is flush with cash, including a rainy-day fund that is likely to top $1 billion at the end of the fiscal year, so why not give Ohio drivers a break? Senate minority leader Rhine McLin (D-Dayton) believes the rainy-day fund is set up for an economic crisis, and soaring gas prices constitute just such a crisis. Her counterpart in the Ohio House, Jack Ford (D-Toledo), agrees — and believes a 60-day suspension, at a cost of $228 million in foregone revenue, is appropriate.

Taft has dismissed a repeal or suspension of the Ohio gas tax as impractical. Since Ohio's 22-cent tax generates revenue for road and transportation spending in the state, Taft feels confident that Ohio drivers don't want to trade lower gas prices for more potholes and construction delays (already a problem for anyone driving in Ohio). Additionally, Taft does not have the authority to suspend the gas tax without legislative action — unlike Governor O'Bannon, who has the authority to repeal Indiana's sales tax (but not the excise tax) for 60 days. Taft admits frustration with soaring prices, but prefers putting pressure on OPEC and continuing federal investigations into the problem.

While the price hikes have been blamed on everything from President Clinton's failed (or nonexistent) energy policy and price gouging by oil companies to environmental regulations and pipeline breakdowns, the real answer might be as simple as economics 101: supply and demand. According to experts quoted in the Columbus Dispatch, Ohio has fewer gas stations and higher fuel demands. The fuel industry in Ohio has largely been consolidated into conglomerates like Marathon Ashland, BP Amoco, and Exxon Mobil. On the demand side, with the popularity of SUVs and other "gas guzzlers," Ohio drivers seem intent on consuming more and more fuel. With summer vacations and other activities nearing their peak, this is unlikely to change. In fact, while many drivers search frantically for cheaper prices (often ignoring my dad's advice: Don't spend $2 trying to save $1) plenty of others are paying the price with a shrug of the shoulders. The good news is that prices in some communities seem to be leveling off.

While the gas crisis may eventually fade, the larger tax question will linger. Taft will need to walk a careful line between "fiscal prudence" and "big government" to keep his party and taxpayers happy. Right now a repeal or suspension of the gas tax in Ohio is unlikely without further jumps at the pump. Ironically, cutting the federal gas tax (an argument eloquently made by Larry Kudlow on this site) would give Taft some relief, but that option seems just as unlikely, for much the same reasons. Whatever the outcome, the unique nexus of high gas prices, budget surpluses, and politicians seeking election should provide an interesting summer.

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