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Tuesday, May 06, 2008

Raise the Gas Tax by a Buck!?

There’s a debate on the presidential campaign trail right now about whether it makes sense or not to provide a federal gas tax holiday during the summer driving season.

But in a recent story, National Public Radio’s economic correspondent Chris Farrell went in a completely different direction. He suggested jacking up the federal gas tax by a buck.

Farrell believes that “will send an important signal to the market for research and development into alternative energy.” He acknowledged that the market already is sending signals without a gas tax increase, but this would “say energy prices or gasoline prices are going to stay high.”

And this is a good idea?

In reality, dramatically increasing the federal gas tax has nothing to do with market signals. By definition, a tax increase is not a market signal. Instead, it’s about government, at the behest of various special interests, pushing consumers, businesses and the economy around to their own liking.

And wouldn’t this tax hike be regressive – hitting lower incomes harder? Well, yes, Farrell acknowledged. But other taxes could be cut to compensate, he said. Yeah, right, like that would happen.

In the end, the only thing that a major gas tax increase would guarantee is higher prices at the pump, which would hit consumers, small businesses and the economy hard, and provide more money for members of Congress to waste on pork projects.

That’s just dumb economics.

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