Politicians’ lack of understanding of the most basic economic principles is staggering. Don’t they have advisers to tell them the obvious, or is achieving a political goal worth ignoring reality?
The gasoline tax exemption proposed by President Biden is the latest counterproductive idea on energy, an economic segment where they never seem able to touch on understanding. Gov. Phil Murphy almost deserves credit for rejecting Biden’s suggestion to pair a temporary federal gas tax suspension with some time off to pay New Jersey’s gas tax. But alas, Murphy rejects the idea for the wrong reasons.
Biden would suspend the federal tax of 18.4 cents per gallon for three months. Even if this pause reached ailing motorists, it would be a big change when gas prices hover around $5 a gallon. There’s no guarantee that prices at the pump would drop 18 cents, and they certainly wouldn’t — maybe not at all. The federal gasoline tax is paid by refineries on their output, and oil refiners have suffered from the pandemic and the political demonization of fossil fuels. Refineries could pocket much of the 18.4-cent-a-gallon break and still charge wholesale buyers less.
People also read…
Suppose the federal gasoline tax exemption actually reached motorists, and it was matched by New Jersey suspending its gasoline tax of 42.4 cents per gallon. Sixty cents a gallon might make a difference for some drivers. If it did, however, they might not try so hard to limit their driving and the expensive gas it requires.
Give people a discount on something and they’ll buy more. Raise the price and they buy less. High prices are reducing current and expected global demand for gasoline and oil, so prices have started to fall. Further declines will depend on other factors, such as high inflation and political manipulation of energy markets against fossil fuels.
Murphy has already ruled out waiving New Jersey’s gas tax and making Biden’s proposed vacation more than three times larger. The state gasoline tax is spent on building roads, repairing and improving related transportation – funding ongoing and planned projects.
“It’s constitutionally tied to infrastructure projects that would have to be stopped, and then when you restart them, it would cost all of us, including the taxpayers, more money,” Murphy said recently. Glad to hear him at least speak in favor of prudent and efficient use of public money.
The federal government also devotes its gas tax revenues, primarily to highways and public transit, in funds distributed to the states. That didn’t stop Murphy from endorsing a federal gas tax waiver, as the Biden administration’s spending is even less constrained than his in New Jersey.
“The reason the (federal government) can do this is, quite simply, they can print money, and we can’t,” Murphy said recently. This statement is enough to elicit prayers of gratitude, even among atheists.
Gasoline taxes are a legitimate user fee if revenues are spent on costs associated with automobile transportation. It is also a consumption tax that can be used to encourage or discourage activity.
We urged governments years ago, when gasoline was cheap, to consider raising the tax on it to pay for transport infrastructure or even to encourage drivers and the auto industry to choose more efficient vehicles. This would have helped keep gas prices and consumption moderate.
Now it is far too late, and the surge in revenue from soaring prices is being injected into the oil companies, refiners and oil-producing countries that politicians publicly criticize. Perhaps they see advantages in it that they do not reveal to the public.