Gas Tax Freedom


Senator Rand Paul (R-KY) had a little proposal for bringing relief to America’s gas pumps yesterday: eliminate the federal gas tax for the next four months.  He plans to attach such an amendment to every energy bill that comes before the Senate.

Paul noted that oil companies make an average of 7 cents per gallon in profit on the sale of gasoline, while the federal government takes 18 cents of every dollar.  Eliminating the federal gas tax would immediately knock eighteen cents off the price at the pump, since the tax is levied at the point of sale.

“You want to have lower gas prices this summer?  You want to help the people who are struggling?” Paul asked.  “Let’s have a gas tax holiday.  It’s only a short-term solution.  Let’s get rid of the 18 cents for the next four months through the summer season.”

One hears such suggestions from time to time, but the points Paul made while presenting his idea are particularly interesting.  We can’t lower the price of gas by eliminating that seven-cent oil company profit, because “if you eliminate profit, you wouldn’t have oil companies.  Everybody works for a profit.  We all work harder because we maximize our profit.” 

That would do a lot of damage to the owners of the oil companies, which include a lot of average people.  “You have a 401k, you have an IRA, you have a mutual fund, you own the oil companies.  Corporations are owned by people.”

He described the current Democrat lust to raise taxes on the oil companies as “economic illiteracy,” pointing out that “if you raise costs on a business, if you raise taxes on a business, you will raise prices at the pump.”  Just as people own the corporations, the people ultimately pay all taxes.

Of course, a gas tax holiday would cost the federal government a hefty chunk of revenue – $10 to $12 billion over the next four months, by Paul’s estimate.  He would recover this through cuts in foreign aid and corporate welfare programs.  (Besides, didn’t we just spend a trillion dollars on infrastructure in the Obama “stimulus?”  What’s a paltry $12 billion in lost gasoline tax revenue, when measured against that windfall?)

One may debate the choice of targets for these offsetting cuts, but the idea raises an important point about the fluidity of money.  The federal government has vast stores of fat, bulging from every inch of its massive anatomy, that can be tapped for spending cuts.  Every dollar it refuses to return to the people could be taken from any pound of its flab.  Washington could grant us immediate relief at the gas pump by adopting Paul’s proposal.  Its refusal to do so means that every one of the stupid and wasteful things it spends money on is more important than helping Americans make ends meet. 

If you want to resent someone over the appalling cost of fueling your automobile, try directing your ire at the politicians who could make gas eighteen cents cheaper tomorrow, but refuse to compromise their bottomless greed for money and power.  They’re the same people who Rand Paul refers to as “an enemy to production, an enemy to drilling, an enemy to all things related to energy.”  The demand for gas is outstripping supply, and they are the enemies of supply.  You can take their side and drive the oil companies out of business, if a pre-industrial lifestyle appeals to you… or you can defeat them at the polls, and explore more permanent solutions than a summertime gas tax holiday.  Sit out the battle, and you join Big Government’s side by default. 

Why not make a list of the most foolish $12 billion in federal spending you can think of, and ask your favorite politician why it’s worth making you pay 18 cents a gallon more at the pump this summer to fund it?  Let the federal leviathan chew on its own tail for a while, instead of expecting American citizens to make do with less and less.