So there is talk of removing some or all tax on gas now that prices are getting high again.? Sounds reasonable enough: lower taxes and gas is magically cheaper.? Assuming for the moment that the US doesn’t rely on this revenue, why should be pay all of this extra money on top of the true value of gasoline?? Simple math states that $3 – $1 = $2.

But for the life of me, I can’t get that answer from my trusty Econo-Calc 3000.? Every time I punch in $3 – $1, I get…$3.? WTF!?? Well, when technology fails, go back to good ol’ pen and paper.? Where’s a good envelope when you need one?? Ah, here’s one.

Scene: Somewhere on the back of an envelope.

Gas has been an inelastic good over the range of prices that a tax cut would span.? So say we cut taxes, what’s to stop the oil suppliers from simply raising the price right back up, this time taking the money that was going to the US government and now putting it in their pockets?? Well, nothing.? They know the consumer will buy at $3 so I’ll venture to guess that if the price dropped to $2.80 from a tax cut, the oil cartel would do a little dance of joy.? The price people are willing to pay hasn’t changed.? What was once going to the US would now be up for grabs.

Now even if the oil countries didn’t take the free lunch (yeah, right), what would lower prices really accomplish?? Well, probably more consumption of oil.? That would basically force the price right back up because supply of oil is pretty steady.? So, one way or another that tax money is going to find its way to someone’s pocket, just not yours and mine.? And just to get a bit philosophical, do we really want a policy designed to?encourage more oil use, not less?

Finally, the gas tax is a dedicated tax.? Its revenue is funneled right to the maintainance of our highway system.? Not really a reason to raise your eyebrows at your local Congressperson. So a tax cut touted as a way to make it easier to afford driving would potentially negatively affect the system that facilitates our driving in the first place.? So I’d be driving on worse roads and still be paying the same price for gas when all is said and done?? No thanks.


Disclaimer:? It’s late and I could be totally off on this one.