Gas-Tax Cut: Running on Fumes
If political courage in Washington could be measured in a fuel tank, the gauge this month would be pointing to "E." In what can only be labeled a cynical attempt to gain political mileage, Republicans have proposed a repeal of the 4.3 cents-per-gallon fuel tax imposed in 1993 to help reduce the federal deficit.
Afraid to be labeled tax-and-spend liberals, the president and many congressional Democrats have said they will go along with this irresponsible plan.
It is a sad commentary on the depth of commitment to balancing the budget that after a year of hard work, a balanced-budget plan still has not been adopted.
After scarcely a week, by contrast, a bipartisan stampede to pander to motorists with a fuel- tax cut is being allowed to undermine serious deficit-reduction efforts.
And for what? What would decreasing the fuel tax by 4.3 cents per gallon do for the average American motorist? According to the nonpartisan Congressional Budget Office (CBO), you shouldn't start planning that extra summer vacation just yet. The CBO has determined that the average cost per licensed driver of the 1993 fuel tax is $30 a year. Since the proposed fuel-tax repeal would only last seven months, your savings would come to approximately $17.50, or about one tank of gas.
Unfortunately, most economists and industry experts are now predicting that the repeal wouldn't even be passed on to American motorists by the oil industry. In effect, the repeal could become a short-term corporate subsidy.
What would decreasing the fuel tax by 4.3 cents per gallon do to this year's budget deficit? If offsetting savings were not enacted elsewhere in the budget, suspension of the tax through the end of December would add about $3 billion to the annual deficit.
Even enacting dollar-for-dollar savings offsets would not "neutralize" the impact that repeal of the fuel tax would have on efforts to balance the budget. This is because the budget savings being considered to offset the revenue loss from repealing the fuel tax are already identified and earmarked as part of the package of policies intended to balance the budget. Once these budget savings are used instead to pay for the fuel-tax repeal, they no longer can be used to balance the budget.
With the average American already paying $800 in taxes each year just to finance interest on our massive $5 trillion debt, we should not be considering a proposal that would add $3 billion to that debt over the next seven months. Cutting any broad-based tax while the nation is running chronic deficits defies common sense. Congress and the president should enact a legitimate plan to balance the budget first and only then consider tax cuts - including fuel- tax cuts.
The debate over the price and supply of gasoline is occurring at a time when fuel costs in the United States are well below their historical average and when market factors already seem to be driving down the cost of gasoline without a fuel-tax cut.
In any event, anyone who drives has noticed that gasoline prices fluctuate - week to week and even neighborhood to neighborhood - enough that a repeal of the 4.3 cents-per-gallon fuel tax would not be clearly identifiable at the pump, even if it were in fact fully passed through to consumers.
In short, there are no sound economic reasons to repeal the 4.3 cents of gasoline-tax increases. Congress and the president should stop their shameless pandering, let market forces reduce gas prices, and get back to work on balancing the budget.