Both John McCain and Hillary Clinton propose a summer “holiday” from the federal gasoline tax, but did you know that this tax has been steadily falling in inflation adjusted dollars for the past 15 years?
The federal gas tax was last raised in 1993, from 14.1 cents a gallon to the current 18.4 cents. Adjusted for inflation, that makes our current tax the equivalent of only 12.4 cents a gallon in 1993 dollars. It is interesting to note that if in 1959, the year Congress established the National Highway Trust Fund, the then 4 cent tax was pegged to inflation, consumers would now be paying about 29.4 cents a gallon.
Still think our federal gas tax is unaffordable? Take a look at the US tax compared to a handful of other industrialized nations:
Country | Gas tax in US cents |
Belgium | 422 |
France | 421 |
Germany | 449 |
Italy | 403 |
Japan | 439 |
Netherlands | 466 |
United Kingdom | 471 |
United States | 18.4 |
Even when you add in state and local taxes, US consumers get a relative bargain, only a combined 39 cents a gallon on average, with Washington residents paying a near national high of 54.4 cents.
At a time when our bridges are collapsing and many of our cities are clogged with congestion (not to mention global warming and our blood-for-oil war in Iraq), it is hard to see how we can afford to keep the tax at the current historically low level, let alone suspend it entirely for a few months. Indeed, according to today’s Seattle P-I:
The gas tax holiday proposed by Sens. John McCain and Hillary Clinton would save the typical Washington driver $28 this year but cost the state about $126 million in lost highway money and more than 4,300 highway-related jobs, according to a recent report.
Or, it may not actually save the typical Washington driver anything, as according to the US Bureau of Labor Statistics:
Historically, price changes for consumer gasoline have been driven by changes in supply as opposed to demand. In all recent cases, interruptions in the supply of crude petroleum resulted in significant increases in the prices of crude petroleum, wholesale gasoline, and consumer gasoline. However, changes in demand affected gasoline prices only marginally.
Since suspending the federal gas tax will do nothing to increase supply, and could actually increase demand, one can only assume that market forces will act to increase the retail price to fill the void. (That is, assuming you believe in the economic laws of supply and demand.)
Coming up, I’ll tie all my research together into a cogent argument for higher state and federal gas taxes.