(RNS) — Nothing brings out stupid ideas like a crisis. With drivers upset by higher gasoline prices, many politicians are foolishly calling for a suspension of the gasoline tax.
Let’s be clear. This is all about politics. It has nothing to do with economics.
Since Republicans hate any kind of taxes, their calls to suspend the gasoline tax are no surprise. Any chance they get they cut taxes, even if it means higher deficits (which they also claim to hate). Republicans indulge in magical thinking whereby revenues increase while cutting taxes. This is like thinking you can drink yourself into sobriety.
Prior to Ronald Reagan, Republicans believed that cutting spending went hand in hand with cutting taxes. Now cutting taxes is an end in itself. No Republican administration or Congress has significantly reduced the deficit. Bill Clinton is the only president to have run a surplus in recent memory.
The only tax breaks that Republicans hate seem to be ones that help poor people. They refused to extend the child tax credit, which had removed 3 million children from poverty, suddenly developing a conscience about the budget deficit when hungry kids are involved.
The Democrats have their own schizophrenia on taxes. While they deplore tax breaks for the rich, Democrats from high-tax states in the Northeast want to restore federal income tax deductions for state and local taxes, even though the deductions primarily benefit their wealthiest constituents.
Now some Democrats are getting on the bandwagon calling for the suspension of the gasoline tax. This push from Democrats is a sign of how terrified they are that they will lose control of both houses of Congress in this year’s midterm elections. They want to be able to tell their constituents that they are doing something about gasoline prices even if it will have little impact.
The federal gasoline tax rate, which hasn’t been increased since 1997, is currently 18.4 cents per gallon. State taxes on average add another 30 cents per gallon. Since the national average price for gasoline is about $4.33 per gallon, eliminating the federal gasoline tax will have only a minor impact on prices.
Europeans would be delighted to pay only $4.33 per gallon for gasoline. Ireland is currently paying the equivalent of $7.47, the United Kingdom $7.72, France $7.93, Italy $8, Germany $8.26, Norway $10.19.
In addition, there is no guarantee that oil companies and gas stations will pass along the savings if the tax is eliminated. To believe that oil companies or gasoline stations will reflect the lower taxes in their prices is terribly naïve. They are all about maximizing profit. If they can continue to get $4.33 per gallon, why cut their prices to $4.15?
Thus, eliminating the gasoline tax is really a gift to the oil industry.
In addition, the gasoline tax together with the diesel tax (24.5 cents per gallon) raised over $40 billion in 2019 for the Highway Trust Fund, which helps pay for highways and bridges. Last year, Congress passed an infrastructure bill that presumed the continuation of gasoline and diesel taxes. How are we going to pay for repairing roads and bridges without these taxes?
Democrats favor a temporary suspension of the gasoline taxes and they would be reimposed after the 2022 elections. But once a tax is suspended, it is hard to put it back. Do the Democrats really want to be accused of raising taxes prior to the 2024 election?
Then there is the environmental impact of eliminating the gasoline tax. Every economist worth his or her salt has argued that the best way to deal with global warming is to tax the carbon in coal, oil and gas. This sends a signal in the marketplace that the use of carbon should be reduced. Cutting gasoline taxes does exactly the opposite.
Decades of high gasoline prices in Europe have forced drivers into smaller cars and mass transit, which has been good for the environment. The minimum gas tax in Europe is $1.53 a gallon, with the average tax at $2.35 a gallon.
In the U.S., we have tried to mandate higher mileage standards for cars and trucks. The Trump administration undercut these standards, making us more vulnerable to increases in oil prices.
What should politicians do in response to rising gasoline prices?
First, they should be honest in admitting there is little they can do in the short term to lower prices. Oil prices are high because of high demand and OPEC’s refusal to increase supply. To reduce prices, we must reduce demand and increase supply.
Restoring the nuclear deal with Iran would help supply, as was recently shown when crude prices fell slightly on a rumor that a deal was imminent. But even at full production, Iran does not have enough capacity to replace Russian oil. Other OPEC countries need to increase production.
Longer term, Congress needs to pass the provisions of the Build Back Better bill that would deal with climate change. If we had more solar and wind power, we would need less oil and prices would fall. If our homes and equipment were more energy efficient, we would need less oil and prices would fall.
Consumers also need to reduce demand for oil and gasoline by driving slower and less.
Auto efficiency drops dramatically when cars go over 50 mph. The 55 mile-an-hour speed limit in effect from 1974 to 1995 saved an estimated 167,000 barrels of oil a day. Even if the speed limit is not restored, driving at 55 in the far-right lane can save individual drivers a ton of money. The 55 mph speed limit also decreased traffic deaths by about 4,000 a year.
Consolidating weekly trips also reduces gas consumption. And turning the thermostat down in the winter and up in the summer would also reduce demand.
Reducing oil and gas consumption is good for the environment, good for consumers and good for national security. Since the very first oil crisis in the 1970s, partisan politics have made it almost impossible for our country to do what is best for the nation and the world. Politicians have lied to the public by promising unlimited energy at cheap prices.
The Russian invasion of Ukraine and the oil price spike have once again brought home our failure to have an energy policy that plans for the future, protects the environment and insulates our national security from outside forces.
Cutting gasoline taxes is the wrong answer.