Gas tax holiday: McCain, Hillary support it, Obama changes his mind (Video added)

posted at 8:50 am on April 24, 2008 by Ed Morrissey

John McCain wants to give consumers a break this summer by suspending the federal gas tax. Hillary Clinton says she supports that plan. Barack Obama, despite having supported a similar tax “holiday” in Illinois, now says he’ll oppose it. Apparently, gas prices haven’t gone high enough, even though they were less than half of today’s price in 2000 when he supported it:

In a new policy split in the presidential campaign, Barack Obama opposed a federal gas-tax holiday supported by John McCain, the likely Republican nominee. Hillary Clinton said she would be open to the tax break.

Sen. Obama, who voted for a temporary gas-tax break when he was a state senator in Illinois, rejected a federal tax holiday as bad fiscal policy. The federal gas tax raises money to repair and expand the highway system.

In Illinois in 2000, Sen. Obama voted for a six-month, five-percentage point break on the state’s 6.25% gas sales tax. The reduction of the tax, which goes into a general revenue fund, passed on a 55-1 vote and included measures designed to ensure that the benefits of the tax break reached consumers. At one point, Sen. Obama jokingly asked on the Senate floor whether it would be possible to install placards on gas-station pumps telling motorists he had helped win temporary price relief.

When some state legislators tried to make the suspension permanent before it expired, Sen. Obama spoke out against that measure but defended his vote for the holiday, according to transcripts posted on the legislature’s Web site.

“I originally voted for the suspension because I thought that it was extraordinary circumstances, given the huge hike in prices,” he said at the time. Gas prices averaged $1.52 a gallon in March 2000.

Hey, if we put up placards at the pump that give Obama the credit, will he vote for it this time? And could he come up with a more foolish explanation of his opposition? Did he and his campaign think that no one would go back and check the 2000 price to see how it compares to 2008?

Actually, a good case could be made for opposition to the gas tax holiday, but it won’t come from Barack Obama. The removal of the tax for three months only temporarily addresses high gas prices, and in the least effective manner. It would give a short modicum of relief but would do nothing to reduce the pressures that drive gas prices higher. Instead of declaring tax “holidays”, Congress took take some or all of the following actions:

  • End state fuel-mixture mandates — Our refineries have to produce upwards of 30 different formulations of gasoline for different states. It makes our supply chain brittle when it should be flexible and leaves us vulnerable to sudden price hikes when refineries have problems.
  • Begin expediting the approval process for more refineries — We have not built a new refinery in the US for 30 years. We keep expanding the capacity at existing refineries instead, and that also leaves the supply chain vulnerable to disruption when a refinery has to shut down. They now have to run at full capacity constantly in order to meet demand and keep prices down. Over the last two decades, we also now have to import more and more refined gasoline instead of crude to keep up with the demand, thanks in part to a lack of refinery capacity here in the US.
  • Allow more domestic drilling — Oil, like any commodity, increases in price when demand goes up and supply doesn’t meet it. With China and India vastly increasing their demand, prices have gone up accordingly. The only way to get the prices down is to either reduce demand or increase supply. That means the US has to start using its own resources rather than living off the resources of others.

Congress has dithered on all of these issues for years, and had Washington taken the appropriate action — say in 2000 or so — we would already have seen the benefits from it. The tax holiday would at least give a little temporary relief, but until someone addresses the root causes of high gas prices, holidays from reality won’t solve them.

Update: It doesn’t add much to the above, but here’s a YouTube mashup that highlights the Obama change of heart:


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