Tuesday, May 06, 2008

Gas Tax Holiday: Bad Policy, But Good Thing

The gas tax holiday proposed by both Hillary Clinton and John McCain has entered MSM hell where bad analysis and soundbyte journalism wreck any and all reasonable discussion. You know where I stand - any transfer of resource allocation to private hands from government hands is good - and GMU economist Bryan Caplan is OK with the idea too. Well, Instapundit has dug up a gas tax holiday that Obama supported ("Score One for Obama", indeed). And, to be intellectually honest, why shouldn't he? Consumers and voters want it. They see their gas taxes as too high and they know that gas taxes feed inefficient at best, and corrupt at worst, government spending on an enormous scale. While economists and analysts dub the holiday "bad policy" that is not the same as a "bad thing". Sure it is bad policy - any temporary change to tax policy is by definition bad policy, which ought to have a high degree of certainty; and, it doesn't do anything to solve deeper structural problems that cause high gas prices. But that doesn't mean the holiday is a bad thing. Buying the stuff we use cheaper is a good thing. Only an academic economist would tell you that it is not. Here in New York City, we were losing retail business to New Jersey and their tax-free enterprise zones just a train ride away, so we tested out several tax holidays in which clothing and shoes were exempt from city sales taxes. People loved it so much the state also dropped it's sales tax levy. The program was such a success, now there is no city or state sales tax on clothing and shoes under $110. That my friends, is what so many politicians and elites fear - that a gas tax holiday will prove so successful that voter demand for it to become permanent will increase. Think of all the power that would be taken away from politicians and global warming alarmists if they lost the power to tax your fuel consumption. They fear giving you a taste of gas purchases without tax for fear that you might actually like it - and it is they, not you, that know what is good for you.

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