There are at least 3 negative aspects to the gas tax pander (a) it won't work (see my comment or other comments above for explanation); (b) it is terrible environmental policy; (c) it ignores the fact that the revenues for the taxes have positive affects; i.e. rebuilding our crumbling infrastructure (though it would be much better if a sizable portion of it went to alternative transportation projects).

This 3rd factor ties into a right-wing meme that currently rules all mainstream political thought, namely that taxes are all bad and we should always cut taxes, never raise them. In California where I live this has led to the destruction of a school system that was once one of the best in the nation and now is one of the worst. It has led to continually cutting money for health care, all education levels including higher education, money to help people with disabilities, etc. Even fire and police services suffer. All of this because people are unwilling to raise taxes even on the rich to help pay for this, and think there is no alternative to cutting essential services.

So when Clinton panders on this issue she is not only undercutting good environmental policy, she is supporting the right-wing meme on taxes. And this is for a tax cut that will actually benefit the oil companies far more than ordinary people.

Posted at May 9, 2008 9:22 PM in response to The Gas Tax Holiday: A Rare Teaching Moment in American Politics

The point is that the market for shirts and for gasoline are extremely different. On the supply side for gasoline we have an oligopoly, pretty much the same as a monopoly. Oil companies can set the price at what works best for them without worrying about competition. And many buyers have no choice at least in the short term. They have to drive to work. They will pay whatever is the going price. So the oil companies can determine what price works best for them. There is no need for them to lower prices if taxes are lowered. They can keep the same price and increase their revenue. In practice probably some small fraction of the tax decrease will be passed on to consumers because demand varies a little bit with price changes. The shirt market is competitive. If taxes are lowered and some sellers but not all lower prices correspondingly they will increase their sales. A seller that doesn't lower prices will lose sales and will feel pressure to lower the price as well. So lowering taxes on shirts will probably be mostly passed on to the consumer. With gasoline most of the change will go to increased oil company revenues.

Posted at May 9, 2008 8:03 PM in response to The Gas Tax Holiday: A Rare Teaching Moment in American Politics