Lobbyists, Economists Pan Proposal to Suspend Federal Gas Tax

Transportation lobbyists and others say the gas tax summer holiday proposed by presidential hopefuls Sens. John McCain and Hillary Clinton would eliminate $9 billion that could be used for highway projects, wipe out about 310,000 jobs, and ultimately only save motorists about $30 during the three-month break from the tax.

McCain and Clinton have proposed halting the federal 18.4-cent gas tax beginning with the Memorial Day holiday later this month and ending after the Labor Day holiday in September. McCain said he would fill the transportation funding gap with general funds and Clinton has said she would impose taxes on oil companies to make up for lost revenues.

But the idea has drawn little support, and a lot of disdain. From economists to newspaper editorials to presidential candidate Sen. Barack Obama, the plan is being condemned as a detriment to transportation funding.

"It may make for good politics, but it's bad public policy and it's shortsighted," said Matt Jeanneret, senior vice president with the American Road & Transportation Builders Association. "You're talking about $9 billion foregone in revenue to the Highway Trust Fund - 310,000 jobs are at risk."

Aside from the implication that it would take away "tens of millions of dollars to transportation funding," Jeanneret said, the cut will have "very minimal impact" on consumers.

Jack Basso,director of management and business development for the American Association of State Highway and Transportation Officials,said that his group calculated that the gas tax holiday would ultimately only save average motorists about $28 over the entire summer.

"That's not even enough to get you three adult movie passes to see a summer blockbuster," Jeanneret quipped. "You wouldn't even be able to include popcorn."

Standard & Poor's chief economistDavid Wyss agreed that the break is a bad idea for two reasons.

"Number one, as we found out in Minneapolis last year, we still have a lot of infrastructure problems," Wyss said, referring to the collapse of the I-35 bridge in Minnesota. "We need money to fix them. The money to fix them comes from the gas tax. No gas tax, no highway funds."

The second reason is that the gas tax holiday will encourage more consumption of a product that is in short supply in the country, which will increase prices regardless, he said.

Basso and Jeanneret had harsher words for the plan.

"There is no free lunch," Jeanneret said. "You take this from the general fund and you're going to increase the deficit, or offset some other domestic program."

"If you reimburse the trust fund with the general fund, it would add substantially to the deficit," Basso said.

They both said there is no precedent for taking a user-fee and turning it off and on.

"It's bad public policy and sets a dangerous precedent," Jeanneret said.

The calls for the gas tax holiday come as the Urban Land Institute and Ernst & Young recently issued a report calling for a major infusion of federal dollars into transportation projects.

In addition, Senate Finance Chairman Max Baucus. D-Mont.,and ranking minority member Charles Grassley, R-Iowa,have provisions in the FAA Reauthorization bill that would add $5 billion to the highway trust fund to fill a shortfall and preserve jobs. The White House has threatened to veto the bill. The Senate is scheduled to take up the bill this week.

Jeanneret and Basso both support that bill, saying the money is needed because it would really only cover upkeep to highways.

Jeanneret said he doesn't see much momentum for the idea of the gas tax break and that he hopes the "conventional wisdom" on Capitol Hill will be to oppose it. He added that because demand for gas increases in the summer, the prices will jump up and consumers won't see much relief. "You can't legislate market forces," he said.

 

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