The gas tax debate: How much do i save if we suspend the gas tax in my state?

Whether we are for or against the gas tax, we can all agree that we have to argue about this topic in the most honest way. It is an interesting and timely debate. Both democratic candidates have serious and strong long term energy policies, but the debate seems to be focused, here and everywhere, on the short term energy savings or the famous suspension of the gas tax. Most candidates advocate the suspension of the federal gas tax, but i think the suspension of the state gas tax might yield better results.

So, when i hear the claims that the suspension of the gas tax would save the average family 30 bucks over 3 months, i got a little curious and picked up my little calculator to see how much really the suspension of the gas tax in my state would save my family.


I live in a state that has two kinds of gas taxes. A constant excise tax of 9.5 cents per gallon + a sales tax of 7% per gallon, which rises or falls based on the price being charged at the pump.

My wife and I have two cars with a 15 gallon-tank each. We usually fill up each car once per week. So over a month we have about 8 or 9 fill ups for both cars.

So, let us do the math and see if we really saving $30 bucks or less or more if we suspend the state gas tax rather than the federal gas tax.

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A Forceful Response to the McCain-Clinton Gas Tax Attacks

Barack Obama is up with a 60-second ad pushing back against the notion that shutting down the federal gas tax for the summer would be a good move. Take a look:

While the rhetoric being pushed by the Clinton and McCain campaigns working together in tandem to attack Obama may sound sensible on the surface -- who doesn't want a little relief on the price they pay for gas (even if the savings won't completely go to the American driver because lowering the price of gasoline will lead to increased demand which will lead to increased prices; the actual price decrease might only come out to be half of 18.4 cent-per-gallon tax, at best, were the holiday put in place) -- the overwhelming weight of the evidence suggests that this is simply bad policy through and through. Here's Reuters:

A gas tax holiday proposed by U.S. presidential hopefuls John McCain and Hillary Clinton is viewed as a bad idea by many economists and has drawn unexpected support for Clinton rival Barack Obama, who also is opposed.


Economists said that since refineries cannot increase their supply of gasoline in the space of a few summer months, lower prices will just boost demand and the benefits will flow to oil companies, not consumers.

"You are just going to push up the price of gas by almost the size of the tax cut," said Eric Toder, a senior fellow at the Urban-Brookings Tax Policy Center in Washington.

The American people aren't dumb. They understand that this policy proposal is basically a stunt -- something that the Clinton campaign has all but admitted -- that won't do anything to solve the underlying problems facing America's energy supply in the long run and won't really do much even in the short run, either. As such, even though I think it would behoove Obama to stress not only that this McCain-Clinton proposal would not achieve what it sets out to achieve but it would also have direct and adverse effects on American infrastructure (the tax goes directly to funding projects to shore up and build roads) and the U.S. economy (the tax helps pays for thousands and thousands and thousands of jobs right here in America), I think it's a solid play that hits Obama's core message while responding strongly to the double team attack from Clinton and McCain.

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Gas Pains

Higher fuel costs are vexing most of us, but John McCain's proposal to suspend the federal gas tax of 18.4 cents per gallon and diesel tax of 24.4 cents per gallon this summer (since endorsed by Hillary Clinton) is irresponsible and probably ineffectual. The "tax holiday" would cost the federal government $9 billion--and McCain hasn't said how he would replace that revenue. It also wouldn't give drivers much relief unless oil companies also were banned from raising pump prices to swallow the difference. Oil companies have shown time and again that they have neither conscience nor national loyalty. Since the market has established that people will pay upwards of $3.50 a gallon--the average price for gasoline in mid-April--there is nothing to stop Exxon from treating McCain's "tax holiday" as just another windfall for petroleum retailers.

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Gas tax?

Now this is what I am talking about, some real policy. At least it would be if any of the candidates had balls. There is one way the gas tax must go and it is up, way up, gas should be taxed 500% European style. That is what you do when you are dependant on a resource that you don't produce. Your job is to discourage wastes and promote savings and mass transit development. If the government redistributes all the money he gets fairly by I don't know buying people health care instead of jet-fighter to fight alien, it would be painless. Do I sound crazy? I mean it's not like it was never done before, it's being done right now!

That is what rich countries in control of their energy policy do, they subsidize energy efficient mass transit through direct investment. Forget hybrids, they only cut transport cost by 50%, it's meaningless. If you take the train or the bus you cut if by 95%+ and that's what the government should promote.

Mass transit is inconvenient? Absolutely! But it is especially so because we don't use it enough: low use means low frequency, low frequency means inconvenience, and inconvenience means low use.

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The Gas Tax - Your Candidate in Demo Mode

Before us is a gas tax refund that voters (ahem.. we mean) .. drivers.. are wondering if they will see. Word on the street is that the 18 cents per gallon that the federal government uses to pay for infrastructure - is up for being suspended to help Americans cover the skyrocketing cost of gas.

This is your candidate in Demo mode. John McCain sees this issue from a Republican standpoint; he believes that cutting off the source of revenue that pays for the effort to wean us away from Saudi Arabian oil sources - is a good thing.

Hillary Clinton agrees with the republican position. She has publicly derided any opposition to keeping federal infrastructure revenues such as this excise tax - in place , by saying

"At the heart of my approach is a simple belief, .. Middle-class families are paying too much and oil companies aren't paying their fair share to help us solve the problems at the pump"

The two candidates, John McCain, and Hillary Clinton - are taking an interesting approach. I think its one that reflects their candidacy and policy outlook should they become president.

America's dependency on other nations is an interesting foreign policy game. Right now we as a country have some pretty interesting company as a result of our position as a superpower (with China ascendant) ..  our list includes Saudi Arabia, Nigeria, Venezuela, and yes. Iraq. Fun party, huh? Guess which one looks like Christopher Walken sitting in the corner.

When America entered Iraq , the Chinese almost threw their hats in the air and immediately began funding African oil-rich countries with infrastructure. This allowed the Chinese to quietly ratchet up their position in the world and can only be counted as a foreign policy victory on their behalf. Meanwhile, America was involved in a tangled set of new problems that we created for ourselves by pursuing the "quick fix". In fact, it is rumored that immediately after 911 there was discussion in the oval office of how it could be used as a pretext to hit Iraq. Oil companie executives think of the Iraqi oil fields with a twinkle in their eye, much as they would this repeal of the excise tax.

Barack Obama, whose candidacy is fueled by the American people as opposed to larger interests -  chose to disagree with McCain and the republicans by taking the approach that the federal excise tax on gas is useful for funding research to get us weaned off the oil of these countries.  This is an interesting approach for two reasons. First, there are echoes of a foreign policy decision here in this domestic issue - and second, it highlights a very different view of government than the type of democrat that has yielded so much to the Repubicans for so long.

Lets play a thought experiment - Suppose that, just before world war II, when Neville Chamberlain returned from his meetings with Adolf Hitler declaring "Peace in our Time" - the British Diplomat Neville Chamberlain returned from Germany, saying- "We have to go to war. It doesn't look like we need to go to war, now, Adolf Hitler and the Third Reich are a menace and a huge problem we need to address right now before its too late".

One young writer played that thought experiment out in a really nice paper for his Master's degree. The young man's name was John F. Kennedy. According to the young JFK, most britons wouldn't have followed along with that idea(!). He went on to write that nevertheless there were  strategies that Chamberlain could have employed.

So, that brings us to Obama. Who disagrees with McCain. Obama seems to be saying that rolling back the excise tax - when oil companies purposefully run their refineries at reduced capacity, and at a time when America continues to be dependent on radical muslim countries for energy - is the wrong thing to do.

What Clinton and McCain have in common , apart from their position on bribing voters.. I mean.. delivering tax cuts to people who need them,  is that they are making big oil donors to their campaigns very happy.  You can almost see the happy oil company executives beating a path to Washington. You can hear the sound of their cheering. People were actually starting to drive less, now that gas is approaching 100.00 a tank fillup in some places.

Certainly there were some Britons who cheered, when Neville Chamberlain declared "Peace in our Time" -  McCain and Clinton will be well received when they are bribing informing voters... I mean drivers.. that they won't be paying more at the pump. And it might last for a few months before prices rise up again.

But the post-Pennsylvania electoral landscape showing Clinton getting no reasonable boost and the superdelegates effectively split ,  is the hidden stressor to everyone. McCain was painfully aware post-Pennsylvania, that he would have lost to both Obama and Clinton in a General Election faceoff in this important swing state.

But given that both Clinton and McCain share large donors as their base more than the insurgent campaign of Obama, is it reasonable to assume that , given 86% of Americans want cleaner air - this is how your candidate would operate in his or her tenure  as president?

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