Cutting Taxes One Minute; Raising Them the Next
CNN’s ‘American Morning’
says raising gas taxes might be a better move than cutting them.
By Amy Menefee
September 8, 2005
Â Â Â Â
Tax cuts have been the latest craze in gas price management, but
CNN’s Miles O’Brien suggested on the September 8 “American Morning”
that raising taxes might be the way to go.
Â Â Â Â “I think there’s a lot of people who’d tell you
long-term, raising the gas tax would be a good idea,” O’Brien said.
Andy Serwer replied, “Oh yeah. That’s right. But it’s politically
suicidal to suggest that, as we’ve seen.”
Â Â Â Â Serwer was reporting the amount of federal and state
taxes factored into consumers’ gasoline costs, noting that Georgia
had temporarily cut its gas taxes. His report on “stubbornly high”
gas prices was filled with economic malfeasance:
- It’s their
money anyway: Serwer said other states were considering
gas tax cuts. “But there’s some downside,” he said. “Number
one, the states lose hundreds of millions of dollars of
revenue, and number two, it may discourage conservation.
On the other hand, maybe we all need a break.” The idea that
tax relief is a loss to the government is the
standard media approach – ignoring the fact that consumers
get to keep more of their hard-earned money.
manipulation: “… and number two, it may discourage
conservation,” Serwer said of gas tax cuts. If lower
prices did result from a gas tax cut, then yes, demand would
increase. More affordable gas is not the way to “encourage”
conservation. Of course, Serwer didn’t allow that the
government might want to step aside and let the free market
alone, rather than trying to encourage or discourage any
economic behavior. There’s another problem he didn’t point
out: government’s price-controlling behavior doesn’t always
have predictable effects. As The Wall Street Journal explained
in a September 7 editorial, temporary gas tax relief doesn’t
mean consumers automatically benefit. If the savings are
passed on to consumers, then more people will buy the
lower-priced gas. That could lead to long lines or shortages
in the areas with lower prices – not exactly a consumer’s
dream. Or, energy companies could feasibly maintain prices as
they are and pocket the difference, and consumers would never
see the tax relief.
- Name your
price: Serwer said “gas stations are basically able to
charge whatever they want.” But that isn’t the case.
Station owners may “want” to lower their prices, but they
can’t afford to lose money on their product. And if they raise
prices to a level where consumers refuse to buy, even if they
“want” the price to be higher, it won’t stay there. Prices are
determined by demand for gas and the supply available to meet