What would a gas tax holiday really do for consumers?
by May 9th 2008 4:15PM
Presidential candidates Hillary Clinton and John McCain have both floated the idea of a gas tax holiday to "help consumers." Would turning off the federal gas tax for a period of time really help consumers? Or might it actually make our situation at the fuel pumps even worse? The Roni Deutch Tax Center has a few comments about the issue. Currently the feds take 18.4 cents per gallon on gasoline and 24.4 cents per gallon on diesel fuel. A gas tax "holiday" would save the average consumer about $30 over three months (but there are varying calculations out there on this). This means consumers could save about $2 to $5 each time they fill up.
But economists say this isn't a good idea. They say that this savings would do next to nothing for consumers. Why? A drop in the price consumers pay would lead to higher demand, which would probably end up pushing up the price of gas. So consumers would be put back in the same position as without the tax holiday.
There's also a complaint that oil companies would make more money on the higher demand and higher consumption. I don't care if the oil companies make more money on gas or not. They're in business to turn a profit and they provide a much needed (and obviously desired) product to us.
What I do care about is the fact that a gas tax "holiday" won't really do anything for consumers anyway. The government needs to get their hands out of our wallets permanently, and that's not going to happen with a three month "holiday" on one tax. The overall tax structure at all levels of government is unfair to consumers and taxes need to be cut across the board. That would be something to get excited about!
Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
