John McCain and the Gas Tax's Summer Vacation

Recently Senator John McCain of Arizona proposed giving Americans a break from the fuel taxes paid at the pump. Specifically he calls for a hiatus on the taxing of gasoline and diesel fuels from Memorial Day to Labor Day 2008. The taxes currently in place are 18.4¢ per gallon of gasoline and 24.4¢ per gallon of diesel. I think this is a good short-term plan to take a little of the squeeze off of the American wallet, but I know that he cannot continue it beyond Labor Day.

On a weekly basis, I drive to and from work, the grocery store, and other miscellaneous errands. I usually have to refill my gas tank every 10 days or so. This gas tax rebate would save me an average of $1.90/week. Over the course of the rebate that would be about $25 for my car. My husband's car would save about $2.76/week for a grand total of about $37 for the summer. This is barring any vacations we might take during this time. We plan on going on vacation this summer. So the average savings will increase, but we do not know where we will be headed so I do not know how much this tax break will save us on that account.

If this tax break plan passes (I am not holding my breath), we would probably use the money to pay a few bills that we have accumulated like my credit card. This does not seem like a lot of money, all things considered, but it is $62 more than we would have if we paid the taxes all summer. I think, if nothing else, it will give us a little more spending money for our vacation, which is always a happy thought.

There are several immediate benefits to this tax holiday. One of those is that those truck drivers, who are striking, will have part of their fuel bills lifted for a few months. As I wrote in "Rumors Swirling of Trucking Strike," there is a serious need for the reduction in the price of diesel for independent truck drivers. If this tax break were to happen, truckers could see savings of $145 per fueling (based on the numbers in that article). Trucking companies will see these same kinds of savings, which will in turn be passed on to the consumers because part of what we pay in the stores comes from what they pay to get the product to the stores.

Another benefit is that people who will be traveling on the road this summer will be seeing that reduction in the prices of fuel, which will make it more affordable to make that trip. The economy has been in a downward spiral, and there is a definite need for consumers to get out there and spend money. This is one way for there to be more money for consumers to spend. It may not seem like very much per individual, look at it this way. I will save around $24 for the summer, and I drive a Chevy Metro (very small engine - even smaller gas tank). If every licensed driver in the country saved $24 in fuel prices and in turn spent that money, approximately $4.9 billion would return to the economy (based on total licensed drivers in 2006).

According to Americans for Transportation Mobility Coalition (ATM), one of the drawbacks to this tax hiatus is that the highways that these taxes pay for would be compromised. While I agree that the money would not be put into the Highway Trust Fund and therefore would not be spent on the roads, I do not agree that this would "devastate [the] highway and transit programs." The gasoline and diesel taxes are not the only sources of income for the Highway Trust Fund. There are other fuel types that are also taxed (which would be unaffected by the cessation), as well as taxes on tires, the sales of trucks and trailers, the usage of "heavy vehicles," and revenue from fines "for violation of the motor carrier safety requirements" and "certain penalties imposed by the Internal Revenue Code." So, as you can see, this tax break would hardly leave the Fund high and dry.

Another challenge brought up by ATM is that it would be detrimental to the public transportation system since public transit gets subsidies from the Highway Trust Fund. But the key here is "subsidies." The individual state and local governments pay for the majority of public transportation. Those smaller government programs get a helping hand from the federal government, but the federal government does not pay the whole bill for the upkeep of these systems. I do not see how giving the American public this vacation from the fuel tax is going to ruin public transportation.

Overall, I think that this tax break is a good idea. It by no means should be extended beyond Labor Day as that could be very detrimental to the balances available in the Highway Trust Fund, but it will give some relief to Americans' stressed wallets. I hope it passes.

McCain Press Office, "John McCain's Economic Plan," John McCain

AmyMcClair, "Rumors Swirling of Trucking Strike," Associated Content

Office of Highway Policy Information, "Licensed Drivers, by State, Sex, and Age Group," U.S. Department of Transportation: Federal Highway Administration

"ATM Statement on Sen. John McCain's 'Gas Tax Holiday'," Americans for Transportation Mobility Coalition

"The Highway Trust Fund," U.S. Department of Transportation: Federal Highway Administration