I agree with Len Burman on this one – the gain from a gas tax holiday would likely go to refining companies, not consumers.
(Econ 101 students: be sure to prep yourselves for final exam questions analyzing the impact of the tax holiday; if I were still teaching, I’d be sure to pose a question or two…)
Gas-tax holiday among McCain’s plans for economy
Dems say cuts ‘will bankrupt our government’
By Kathy Kiely
PITTSBURGH — Presidential candidate John McCain on Tuesday proposed sweeping tax cuts to jump-start the economy, including a summer-long gas-tax holiday starting Memorial Day.
One concern: the possible impact of a tax moratorium on the federal highway trust fund, which is supported by the 18.4-cent-a-gallon tax on gasoline. The American Road & Transportation Builders Association estimates that the gas-tax holiday could blow a $9 billion hole in the highway construction budget and threaten 310,000 jobs.
A USA TODAY analysis showed that McCain’s gas-tax proposal could save motorists $6.8 billion in taxes during the summer. Len Burman of the non-partisan Urban Institute said the money won’t necessarily go back to consumers. Refineries already are running high to meet summertime gasoline needs, Burman said, so if demand for gas increases, so will prices. He said that means “a huge windfall for refiners,” not consumers.