Texas Gas Tax: Right Idea, Wrong Application

Now this is just a bad idea:

The Texas House last week voted to give motorists a summer break from the state’s 20-cents-per-gallon gas tax. State Rep. Trey Martinez Fischer, D-San Antonio, tacked the surprise measure onto a Senate gas tax collection bill.

He said a couple driving a pickup and a car could save more than $100 over the three months.

But such a tax break would cost the state $500 million to $700 million, and some predict the Senate won’t go along with it.

Gasoline prices are high. Get used to it. There are as many middle-class people in the Middle Kingdom as there are people, total, in the United States. For the rest of our lives we'll be bidding against them for petroleum, until the Indian middle class comes online, when we'll be bidding against them and the Chinese. A tax abatement doesn't change the underlying issue, which is that there are more people chasing gasoline than there were before.

My homeboy Senator John Cornyn is quoted later in the article:

Meanwhile, U.S. Sen. John Cornyn, R-Texas, said in a speech last week that Democrats and Republicans need to work on a bipartisan energy plan that would provide meaningful relief to American consumers.

“There are a lot of laws the Congress can pass — we can even repeal laws — but we can’t repeal the law of supply and demand. And the only way we’ll see these gas prices come down is to form new supply.”

He said the country has gone from 324 refineries to 132, adding that it needs to remove “some of the regulatory impediments which have made it impossible to create a new refinery in this country in the last 30 years.

Emphasis added. Actually, Senator, we could also reduce demand. Take that $500-700 million dollars and make it a yearlong sales tax rebate on cars that get 30 MPG or better on the new EPA fuel efficiency standard and you'd do more to reduce demand than building a new refinery or three will do to increase supply. The chief beneficiaries of a sales tax suspension on gasoline would be people who use the most, while the chief beneficiaries of a sales tax reduction on new cars would be people who, by their purchase decision, choose to burn less gas in the future.

Believe it or not, people, gasoline prices going higher are the only way to get people to use less gas. If we use less gas, our refinery capacity is just fine. Our dependence on foreign oil is lessened. And gas prices will come down for a longer period of time than just the summer.

I don't care particularly if gasoline prices increase, it will make alternative domestic fuels like ethanol and syngas from coal more of a possibility -- and eventually, a necessity. But a tax-free summer will just make the fall that much less fun, and a couple of Gulf hurricanes hitting production facilities will easily undo the suspension of the state gasoline sales tax.

And lest you think this is a uniquely Texan idea, two state legislators from Illinois are proposing to eliminate the state's 5% sales tax on gasoline, permanently. Connecticut lawmakers are also consdiering a temporary gasoline tax reduction. Governor Tim Pawlenty of Minnesota recently vetoed a 5 cent per gallon increase in Minnesota's gasoline tax as part of a transportation bill. As prices increase the short-term populist solution will be to eliminate gas taxes when states are flush with cash, and state budgets are extremely healthy this year.

I'm not a big fan of taxes in general, and further raising of gasoline taxes is not something I'll get behind very quickly. Diverting money from the economy to the hands of politicians is typically neither productive nor an economically-useful endeavor. If legislators want to take some of the money they're already getting and try to use it to "fix" a problem, then they should do the long-term smart thing and not the politically-expedient thing.

Don't treat the symptom, treat the disease.

Update 5/17/2007: The folks over at Ecotality, an environmental blog I frequent have cross-posted this. Thanks, Doug!

Texas gasoline tax alternative