Connel Fullenkamp: A gasoline tax holiday that benefits each of us individually by a mere $2 per tank costs billions of dollars in aggregate, money that should be invested in filling potholes and shoring up rickety bridges and overpasses. - NBCNewsTHINK
, or in other words, a rounding error. Assuming that consumers get two-thirds of the cut, and pay a whopping 12 cents less per gallon, this is still only about two bucks a tank — not necessarily enough to buy a cup of coffee or a dozen eggs these days.
The part of the cut that goes to consumers is so small because basic economics says that whenever a tax like this is cut, the cut is split between the sellers of the product and the consumers. While the price of gasoline falls as gas stations begin to pass some of the tax savings on to consumers, consumers also react to the fall in gasoline prices by purchasing more. This puts some upward pressure on prices that keeps them from falling by the full amount of the tax cut.
Who will actually reap most of the advantages from this tax cut? That’s simple: The people who can afford to keep buying gasoline. The dirty secret of most energy subsidies is that they disproportionately benefit the wealthy, because rich families can afford to keep buying fuel even when it becomes expensive.
Low-income families have to change their behavior, because the subsidies are never enough to make energy affordable for them. They’ll do whatever they can to reduce the amount of gasoline they need to buy, even if it means walking miles to get to work or do food shopping. Meanwhile, wealthy families keep driving but get to pay a bit less. This is why energy subsidies are among the least beneficial tax policies for low-income households that a government can implement.
And if you think that the gasoline tax is free money from the government, then think again. Most of the revenues from
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