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Friday, September 02, 2005

Suspend Gas Taxes

One solution to the (temporarily) out of control gasoline prices: Congress and the state legislatures should immediately pass bills suspending taxes on gasoline. The lost revenue should be categorized as disaster relief spending.

For example, in Louisiana, the state gas tax is 20c/gal. The federal tax is 18.4 c/gal, for a total of 38.4c/gal. (Source:

Update: The IRS has reduced the tax on diesel ful, by allowing commercial uses to buy "duty free" diesel intended for farmers and government vehicles. Story here.


Robert said...

I doubt the reduced taxes would reduce gas prices by nearly as much as the taxes. It's worth a try, but don't hold your breath.

gryhrt said...

It's $3.09 a gallon in the midwest, though they dropped to $2.99 in locations yesterday. While that's certainly high, and it's enough to make one take a look at one's driving habits, is it really a "disaster?" I would question that assertion, and looking at world gas prices supports that.

That information was compiled back in '04, and our $3.09 price is still only at the midpoint.

Yes, it sucks, yes, it requires some changes to our driving habits, but it's not a disaster.

Racedriven said...

I agree with robert, but even if they suspend the gas tax, The oil companies will be the ones who take the 20 cents or more. But it worth trying.

Note: I have noticed diesel prices have dropped and what about developing another fuels and vehicles including diesel-electric hybrid vehicles. I like gasoline, if there was enough to go around.

Ray said...

It will be interesting to watch NASCAR. In the mid 70's, gas problems made attendance tank. Tracks were closed and even torn down. Dealers had 2 year old cars they could not sell.
High prices and unavailability took the fun out of motoring. Stay tuned.

Anonymous said...

When we are short of gasoline government should make it easier to use more?

Perhaps we should have government employees stand by the pumps and hand money to people who fill up.

Suspending the tax is EXACTLY the wrong thing to do.

Al Gore had some odd ideas. But his call for higher taxes on motor fuel was right.

The Auto Prophet said...

Note the word "temporary". The idea is to mitigate the economic destruction (price inflation, airline bankrupcy, etc.) caused by a spike in fuel prices.

Anonymous said...

reply to #6

supposedly what is "temporary" is the supply of gasoline. the price is being set by demand - what people will pay for that limited supply.

lowering taxes will not increase the immediate supply. therefore pump prices will just rise by roughly the amount of the reduced tax.

The Auto Prophet said...

Maybe prices will increase again--or maybe not. Part of the cost of gas to the retailer is tax. If the tax is removed, the retailer will pass the savings on to the customer, to have the lowest competitive price.

If this causes people to go out and buy lots more gas, yes, the price will rise again. However, I don't think they will buy a ton more gas because it costs $2.80 instead of $3.20.

What it will do is reduce the damage to the pocketbooks of lots of folks, especially the working class and "working poor".