2008 McCain’s Loopy Tax Proposal
posted by April 16 at 16:12 PMon
Here’s some “maverick” thinking for you: GOP presidential candidate John McCain wants to “spread [tax] relief across the American economy.” So will he be cutting the income tax? Providing a rebate on the sales tax, one of the most regressive taxes in existence?
Nope. From the AP:
PITTSBURGH - Republican Sen. John McCain on Tuesday called for a summer-long suspension of the federal gasoline tax and several tax cuts as the likely presidential nominee sought to stem the public’s pain from a troubled economy.
To help people weather the downturn immediately, McCain urged Congress to institute a “gas-tax holiday” by suspending the 18.4 cent federal gas tax and 24.4 cent diesel tax from Memorial Day to Labor Day. By some estimates, the government would lose about $10 billion in revenue. He also renewed his call for the United States to stop adding to the Strategic Petroleum Reserve and thus lessen to some extent the worldwide demand for oil.
Together, McCain said, his proposals would “bring a timely reduction in the price of gasoline. And because the cost of gas affects the price of food, packaging, and just about everything else, these immediate steps will help to spread relief across the American economy.”
Now, let’s take a closer look at that statement.
First, McCain says his proposal will reduce gas prices. The problem is, the federal gas tax isn’t why prices are so high (high enough that, for the first time in recent memory, people are starting to drive a little less); the reason gas prices are high is because the price of oil is $113 a barrel—a record level. The nationwide average price for a gallon of regular gas is $3.40 a gallon; cutting that price by 18 cents amounts to a five percent reduction. Put another way, the savings for a typical driver—one who drives about 12,000 miles a year—would be less than $28, or about half the price of a tank of gas. If that’s the tax cut that’s supposed to trickle down to ordinary Americans in the form of cheaper goods, food, and packaging, good luck even noticing it.
Not that McCain’s “trickle-down” thesis makes any sense in the first place. The “tax holiday” he’s talking about, after all, is only three months long. The economy is unlikely to respond to such a short-term reduction—especially if gas prices continue to increase. In fact, economists say that reducing prices actually stimulates consumption, triggering even higher prices. That “tax relief” isn’t going to be very comforting when you’re paying $4.00 a gallon.
Fortunately, that gas tax isn’t paying for anything important, right? Oh, just the Highway Trust Fund, which pays to fill potholes, fix crumbling roads and bridges, and patch up America’s failing highway infrastructure. Oh, yeah, and it’s running out of money already; currently, the trust fund faces a $2-$3 billion deficit. McCain says he’ll fill the gap by taking money out of the nation’s general fund. That’ll increase the deficit, but whatever—when you’re already $410 billion in the hole, what’s another $8 to $10 billion?
Of course, as you may recall, we’re heading into a recession. Cutting federal spending during a recession is no way to stimulate the economy. According to the US Transportation Department, every $1 billion of federal highway investment supports 34,779 jobs.
Then again, McCain is the same guy who said he would “leave it for others to speculate on the technical definition of a recession.”
(Incidentally, if this “gas-tax holiday” sounds familiar… well, it is.)