Clinton Formally Proposes Gas Tax Holiday as Critics Howl

Presidential hopeful Sen. Hillary Clinton has introduced a bill that would establish a federal gas tax holiday, but her Democratic colleagues have not joined her, and economists and transportation lobbyists continue to vehemently oppose the idea.

The New York Democrat's bill, S. 2971, would halt the federal 18.4-cent gas tax from Memorial Day through Labor Day and would make up for the lost revenue by imposing a temporary windfall profits tax on oil companies.

Likely Republican presidential nominee Sen. John McCain, R-Ariz., is also pushing a gas tax holiday bill that he proposed in mid-April. His bill, S. 2890, differs from Clinton's in that he would offset the revenue losses with general funds.

But both proposals have received little support, with transportation lobbyists and economists equating them to election-time pandering.

Transportation lobbying groups have said the holiday would save consumers less than $30 for the three-month break and cost the underfunded highway trust fund more than $9 billion.

While Democratic lawmakers have remained mostly mute on the gas tax, a spokesman for Rep. James L. Oberstar, D.-Minn., chairman of the House Transportation and Infrastructure Committee, said that a recent committee statement against the McCain bill reflects Oberstar's views on Clinton's measure.

"The McCain proposal would bring the highway trust fund, which finances federal highways, highway safety, and transit infrastructure investments, to the edge of insolvency," the statement said.

"There's not a lot to be gained by the 18-cent break," said Jim Berard, the committee's communications director. "It's not going to make a dent in the cost of fuel, saving consumers about $3 a week. In the meantime, we stand to lose $9 billion to $12 billion for transportation funding that would help drivers."

The Tax Foundation, a nonprofit research organization dedicated to educating taxpayers about tax policy based here, also criticized the proposed gas tax holiday. In a report released Friday it said that while it "sounds good in theory," the owners of oil companies are not necessarily the ones who will pay the price.

"Unfortunately, the candidates' political rhetoric has little economic backing," the report said. It added that a windfall profits tax on big oil companies will be paid by individuals who will bear the tax in the short run as shareholders of the oil companies because the value of their stock holdings - which reflect expected future net profits - will fall as soon as the new tax is announced.

"This means that although the owners of the oil companies are the ones who have benefited from the higher-than-expected profits, that group of owners will not necessarily be composed of the same individuals who end up paying the windfall profits tax," the report said.

Meanwhile, some states have proposed their own gas tax holidays. New York Senate Republicans put forth a three-month break from the state's 32.8-cent per gallon tax for the summer, which the state's Division of Budget said last week that it would put a $600 million hole in the state budget. And Florida Gov. Charlie Crist has proposed a plan to cut the state's 33.2-cent tax by 10 cents around July 4 for two weeks. Missouri and Texas lawmakers have also floated holidays.

But the American Road and Transportation Builders Association said gas tax holidays in Illinois and Indiana in 2001 proved to minimally help consumers.

"If you really want to stimulate the economy, you should be increasing your investment in highways and transit projects," Matt Jeanneret, senior vice president with the ARTBA, said in an interview last week. "There's just not nearly enough money going in to the highway trust fund that's needed."

 

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