Politics & Policy

Gas-Price Follies

Don't play the blame game; just cut the tax.

Politicians playing the blame game on oversized gasoline prices are pointing fingers at OPEC, the Environmental Protection Agency’s reformulated gas requirement, and price gouging by big oil companies. But the general public has a better idea: Cut gas taxes.

A new poll by Rasmussen shows that 67% of likely voters believe that gas taxes should be reduced in order to lower the price of gasoline at the pump. Just 14% disagree. Also, the survey shows that 57% believe that taxes collected by the government are far greater than the profits of gas-station owners. So Al Gore’s attack on oil companies, so reminiscent of Jimmy Carter’s malaise days, is a non-starter. What’s more: When asked if high gas prices are a good thing in order to reduce driving and help the environment, 69% of respondents said no. Only 18% answered yes.

So far only two governors seem to understand this populist anti-gas-tax movement. One is Indiana’s Democratic governor, Frank O’Bannon, and the other is Illinois’s Republican governor, George Ryan. Neither George Bush nor Al Gore has yet recommended lower gas taxes. Neither has House Speaker Denny Hastert nor Senate Majority Leader Trent Lott.

President Clinton admitted, “This is a big problem because there are a lot of Americans who have to drive to make a living… This is going to rifle through our economy.” But like Al Gore, the president would rather blame big oil companies than cut gas taxes.

What makes all this so timely is not just that Midwestern gas prices are exploding, but also yesterday’s Treasury Department release of the latest budget figures for fiscal year 2000. Spurred by a 12% rise in tax receipts, the FY 2000 budget surplus now looks to be coming in as high as $250 billion. Individual-tax revenues are rising by 15%, and capital-gains revenues by 16%. Overall spending is up 5%, but if net interest expense on the federal debt is excluded, then government spending is actually rising at a 6.3% rate, more than twice the inflation rate. Even with this excess spending, the Internet economy has thrown off so many tax revenues that the operating-budget surplus (excluding Social Security and Medicare) could come in around $65 billion.

So there’s a nice matching of interests here: The public wants tax cuts, and the government has more than enough money to provide them. Now there’s yet another hook for tax cuts. After a year of Federal Reserve tightening moves to raise interest rates, nearly half of the general public thinks the economy will be adversely affected (according to Rasmussen). Sixty-nine percent believe that gas-price increases will also have a negative effect on the economy. But get this: The most positive action the government could take, according to 57% of those surveyed, would be to enact a major tax cut.

Now back to gas taxes. Between 30 and 40% of the price of a gallon of gasoline comes from the tax component. At the federal level, there are plenty of fuel taxes from which to choose for tax-cut purposes. The best known, of course, is the gasoline tax, which was last raised in 1993. But there are also taxes on gasohol, ethanol, nonethanol alcohol, diesel fuel, special motor fuel, alcohol fuel, and, of course, let’s not forget the gas-guzzler tax on cars.

So, with all these federal fuel taxes, a possible $65 billion operating-budget surplus, and the threat of an economic slowdown from high interest rates and high gas taxes, doesn’t anyone in Washington understand that this would be a great time to provide tax relief? The anticipated on-budget surplus should be turned back to the taxpayers. All of it. A good chunk of that tax cut should provide relief from various federal fuel taxes, which, if combined with state fuel-tax relief, would bring down gas prices at the pump and provide some needed economic stimulus as well. If there’s no time left to craft a good tax-rate-reduction plan in Washington for this session of Congress, then the rest of the operating surplus should be sent back to taxpayers as a simple across-the-board tax rebate. If it’s not returned to taxpayers, Congress will surely incorporate the surplus into additional spending for next year. But clearly, government doesn’t need the money. And, just as clearly, the overburdened taxpayers who drive the economy do.


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