Gas tax ‘holiday’ is criticized

Times Staff Writer

As Sens. John McCain and Hillary Rodham Clinton pressed Thursday for suspension of the federal gasoline tax, economists, environmentalists and others roundly denounced the plan as a political stunt that would favor the oil industry rather than consumers.

Economists are “as close to unanimous as you can get” in viewing the proposal as a “horrible idea,” said Joseph J. Doyle Jr., a Massachusetts Institute of Technology economist who has studied gas tax “holidays.”

Voter frustration over soaring gasoline prices has led Republican McCain and Democrat Clinton to make the proposal an economic centerpiece of their campaigns for president. With gas prices nearing $4 per gallon in much of the country, the tax relief carries broad political appeal.


But economists and other critics have ridiculed the plan for a moratorium on the 18.4-cents-per-gallon tax, and newspaper editorial boards across the nation have cheered Clinton’s Democratic rival, Sen. Barack Obama, for opposing it.

Philip K. Verleger Jr., a Colorado economist and author of “Adjusting to Volatile Energy Prices,” called suspension of the gas tax “a hideously bad idea” that would let refinery owners keep some or all of the savings.

“My guess is 80% or 90% of the revenue loss for the government would go into the pockets of the oil industry -- and not trickle down to consumers,” he said.

By encouraging consumption of gasoline, Verleger added, the proposal also contradicts commitments made by both Clinton and McCain to fight global warming and cut U.S. dependence on foreign oil.

“This is true pandering to voters without any consideration of the long-term interests of the country,” he said.

Doyle, who co-wrote a study of state gas tax holidays in Illinois and Indiana in 2000, said results in those states suggested that suspension of the federal tax would save motorists 10 to 15 cents per gallon. The savings, however, would be “lost in the usual ebb and flow of prices,” so an average motorist would reap perhaps $20 over the summer, Doyle said.

“For the usual person who fills up two or three times a month, it doesn’t look like huge savings,” he said.

Suspension of the tax from Memorial Day to Labor Day would result in a roughly $9-billion loss to a federal highway trust fund.

Clinton has called for a windfall-profits tax on oil companies to make up for the loss. McCain has vowed to replenish the highway fund with other tax revenue, but a spokesman for his campaign declined to say what spending would be cut to preserve the roads program.

Road builders are skeptical. They say suspension of the gas tax could jeopardize more than 300,000 highway-related jobs, about 23,000 of them in California.

“It may be politically appealing, but it’s bad public policy,” said Matthew Jeanneret, a spokesman for the American Road & Transportation Builders Assn.

Environmentalists said the tax break would have little practical impact but still condemned it. Dan Becker, a Washington consultant to environmental groups, said savings for consumers would be too small to affect how much driving they did. And at a time when America needs to use less gasoline, he said, “it sends the wrong signal about our addiction to oil.”

Some McCain allies also questioned the plan.

“I have my doubts about it,” said Republican Sen. John Cornyn of Texas, a McCain supporter.

Underscoring the long odds against the proposal in Congress, House Speaker Nancy Pelosi (D-San Francisco) criticized it Thursday. She said there was no reason to believe the oil industry would pass along the tax savings to consumers.

“I think the biggest answer to our challenge is to invest in renewable energy resources, and to do it now,” she said.

In Indiana, where Clinton and Obama are competing in a primary Tuesday, the two Democrats are running dueling TV ads about the gas tax proposal. Campaigning in a suburb of Indianapolis on Thursday, Clinton said critics of the plan failed to grasp the struggles of working Americans.

“I find it frankly a little offensive that people who don’t have to worry about filling up their gas tank or what they buy when they go to the supermarket think that it’s somehow illegitimate to provide relief for the millions and millions of Americans who are on the brink of losing their job,” she said.

In a round of television interviews, McCain said that the poorest Americans were the ones who drove the most, and that they spent more than others on gas because of the age of their vehicles. “Why don’t we just give them a little break for the summer?” McCain said on MSNBC. “Maybe a better meal for their kids, maybe travel a little bit.”

The Republican National Committee released a Web ad telling viewers that Obama voted as a state senator for the Illinois gas tax holiday. “Does he understand our economy, and what American families and businesses need?” an announcer asks in the ad. “Barack Obama: out of touch, not ready to be president.”

Obama’s campaign put out statements by two former Clinton administration Energy secretaries slamming the proposed tax break. One of them, New Mexico Gov. Bill Richardson, called it “a shameless political ploy that would do nothing to help American families.” The other, Federico Pena, called it “the kind of pandering that insults people’s intelligence.”



Times staff writer Richard Simon in Washington contributed to this report.