Maybe the Masses Want Actual Opium This Time

David Weigel | May 1, 2006

This, from The New York Times, is truly inspiring: Americans are telling their Congressfolk that they don't want rebate checks.

Under the proposal, $100 checks would be sent late this summer to an estimated 100 million taxpayers, regardless of car ownership. Single taxpayers with adjusted gross incomes above about $146,000 would be ineligible for the checks, as would couples earning more than about $219,000. The $100 figure was determined by Mr. Frist's office, which calculated that the average driver would pay about $11 per month in federal gas taxes over nine months.

...

But disapproval started flowing in almost as soon as the idea surfaced, said aides in several Republican offices. One senior aide to a Southern lawmaker said the calls were surprisingly harsh. Some complained that the rebate would amount to only two fill-ups at the gas station.

A few excerpts really don't do justice to the stupidity practically oozing from the rebate supporters quoted here--senators, consultants, pollsters.

If you're interested in oil-related hysteria, check out Tim Cavanaugh's column on the subject or Ronald Bailey's May cover story on peak oil.

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|5.1.06 @ 2:37PM|#

Anything they do is going to most likely not going to fix anything and probably make it worse. If they want to give me back my money (even a paultry amount that will most likely be re-taxed at tax time) I am not going to complain.

|5.1.06 @ 2:42PM|#

Another Lurker,

Same here. 100 bucks is 100 bucks.

Captain Holly|5.1.06 @ 2:50PM|#

$100 bucks is insultingly bad. It's typical that clueless elitist Senators would think that a $100 check would significantly help those pore-an'-starvin' working class folks drive their Chevys to the local Wal-Mart, and thus buy their undying loyalty in the next election.

If they really wanted to help Americans during the summer driving season they'd suspend the federal gas tax from Memorial Day to Labor Day. But since that would cost them money and vividly illustrate the cost of government to the average citizen, they won't do it.

|5.1.06 @ 2:53PM|#

So if you drive 1000 miles per month, and get an average of 25 miles per gallon,and if gas prices have gone up $1 per gallon, you're spending an extra $480 per year, or $40 per month. How many people who are whinging about higher gas prices (which are, as noted, lower than most of the developed world) can't spend an extra $40 per month, or drive less, or trade in to get a car with better gas mileage. Babies. (feeling dyspeptic today).

|5.1.06 @ 2:58PM|#

100 bucks...I'll take it. No complaints.

|5.1.06 @ 3:09PM|#

Hmm... for years Republicans campaigned AGAINST this sort of thing... now they're doing it? I mean, while I'll take the check, I still object to this on principle.

Fiscal Conservatism is truly dead. What reason does a socially-liberal federalist/minarchist like myself have to vote for the GOP these days?

Yeah, that's right- NONE.

I'll take the free money, though.

|5.1.06 @ 3:18PM|#

Once again, the poor & minorities will be hit the hardest with this.

Agreed. 100 bucks is 100 bucks. In lieu of them doing anything else, it's fine.

Except I'm not sure how they are planning to pay for it.

|5.1.06 @ 3:25PM|#

"If they really wanted to help Americans during the summer driving season they'd suspend the federal gas tax from Memorial Day to Labor Day. But since that would cost them money and vividly illustrate the cost of government to the average citizen, they won't do it."

How about just get rid of it all together? That sounds like a great idea. I'll still take my stupid $100 if that is all they are going to do. It belongs to me anyway. Take my wife out to dinner.

"So if you drive 1000 miles per month, and get an average of 25 miles per gallon,and if gas prices have gone up $1 per gallon, you're spending an extra $480 per year, or $40 per month. How many people who are whinging about higher gas prices (which are, as noted, lower than most of the developed world) can't spend an extra $40 per month, or drive less, or trade in to get a car with better gas mileage. Babies."

Amen emmajane, I really fail to see the "crisis". I mean if bring my lunch to work a couple days and skip a Blockbuster run I can save more than $40 a month!!! Babies indeed.

|5.1.06 @ 3:28PM|#

You know, they could just cut gasoline taxes. I've heard good arguments that, however screwed up the market for oil might be, gas stations actually have to compete with each other. So if the tax were cut at the pump, the price would go down.

That would certainly make more sense.

MP|5.1.06 @ 3:31PM|#

OK, for all you "100 bucks is 100 bucks" people, would you be more/less/neutral in favor of your Congresscritter who voted for this? Can't we all simply agree that this is closest to the rawest form of pandering and vote buying?

As if anything was needed to show how the GOP is absolutely lacking in principles, but this clearly ices it.

|5.1.06 @ 3:37PM|#

Can't we all simply agree that this is closest to the rawest form of pandering and vote buying?

It's as obvious as Paris Hilton is stupid. But it's still $100 of my money back that I can spend more intelligently than the government. Such as on hookers and blow.

|5.1.06 @ 3:38PM|#

"I'll take the free money, though."

FREE MONEY indeed.

|5.1.06 @ 3:39PM|#

MP,

You're telling me what I'm already well aware of: Politicians will be politicians. Big surprise. I simply prefer getting $100 of my money back to getting nothing. That's it.

|5.1.06 @ 3:44PM|#

"Can't we all simply agree that this is closest to the rawest form of pandering and vote buying?

As if anything was needed to show how the GOP is absolutely lacking in principles, but this clearly ices it."

Yeppers MP, totally stupid. GOP completely sucks. If they REALLY were the party of small government (gag cough bullshit), they would be arguing for the gas tax to go away completely. So I am in total agreement with you.

I am still going to take back my money anytime I can get it. I can still take the $100 and call them idiots at the same time. Hey I'll even take yours iffin you don't want it. THEN it would be free money. The original $100 belonged to me all along.

|5.1.06 @ 4:06PM|#

Could they print up special $100 bills with GWB's face on 'em?

Thomas Paine's Goiter|5.1.06 @ 4:09PM|#

Fiscal Conservatism is truly dead. What reason does a socially-liberal federalist/minarchist like myself have to vote for the GOP these days?

It died in 1952.

|5.1.06 @ 4:15PM|#

If I get my 100$ back I will mail it right to the democratic party.I have never voted for a democrat but the republicans most likely won't get another one from me.Viva la libertarians

|5.1.06 @ 4:17PM|#

On an anecdotal basis, I see little evidence that these higher gasoline prices are affecting consumption. I still see SUVs idling unoccupied outside convenience stores, laundromats, garage sales. I still see delivery trucks and semis idling at stores and terminals. Plenty of leadfoots and tailgaters on the road. But oh do people complain about fuel prices!

Reminds me of the frequent divergences between the consumer sentiment surveys and consumer spending measures: there's usually a big gap between what people say when asked, and what they actually do.

And, if _anybody_ sends me a $100 check, I _will_ deposit it.

R C Dean|5.1.06 @ 4:22PM|#

I still see SUVs idling unoccupied outside convenience stores, laundromats, garage sales.

Idling? Unoccupied?

Anyone who did that in Dallas wouldn't have an SUV for long.

|5.1.06 @ 4:22PM|#

I see little evidence that these higher gasoline prices are affecting consumption.

Of course not. Partly, this is a media-fed circus. And, given that 98% of Americans cannot function without a car, I expect it will take much, much higher prices before behavior changes.

MP|5.1.06 @ 4:47PM|#

I am still going to take back my money anytime I can get it.

Don't get me wrong...I'd still cash the check, but then would likely apply it to my efforts to vote the bums out.

Sigmund Freud|5.1.06 @ 4:51PM|#

And gas spending is a smaller proportion of income than it one a generation ago, etc etc.

I'm sort of torn with the $100 of my money back thing...I mean, sure, that's great and all, but it's money they've already spent on something else and they'll just have to take more from me in the future to pay it back.

Now, on my budget, $40 a month is nothing to sneeze at, but I can save almost that much a week by bringing my own lunches rather than eating out every day, which is what I do when money gets tight.

Timothy|5.1.06 @ 4:53PM|#

Whoops, that last was me...and now my secret is revealed. Pulled a Jennifer, as it were.

|5.1.06 @ 5:07PM|#

On this plus side, the gas price hike is a blessing to the IT industry in increasing the use of telecomm, videocomm, VPN and other online collaboration technologies.

|5.1.06 @ 5:10PM|#

"So if you drive 1000 miles per month, and get an average of 25 miles per gallon,and if gas prices have gone up $1 per gallon, you're spending an extra $480 per year, or $40 per month. How many people who are whinging about higher gas prices (which are, as noted, lower than most of the developed world) can't spend an extra $40 per month, or drive less, or trade in to get a car with better gas mileage. Babies. (feeling dyspeptic today)."

Amen Emma. Even the middle and lower middle class are grossly weathly in this country by any objective standard. That is why the gas price increase hasn't slowed down the economy or cut into consumption much. It is just not that much money to most people. The poverty pimps and the politicians of both parties have to convince us how poor and helpless we are and how much we need their assistance. Otherwise, people might stop and wonder why they are paying 1/4 of their income and nearly trillion dollars of our GDP for all of this "help" we are supposed to so desparately need.

My favorite quote in a long while was Tim Russert saying something to the effect of "gas demand is up and supply is down, yet prices continue to rise."

|5.1.06 @ 5:32PM|#

And the words flowed from her lips, "Let them eat cake..."

When was the last time any one of you were taxed AND actually represented?

I am Tlingit Indian. No need to pretend to be one. Tea anyone?

|5.1.06 @ 6:11PM|#

Well, it'll be another few drops into the debt bucket but I have a V8/RX7 project going on here. Please send checks this way.

PoliticalCritic|5.1.06 @ 6:46PM|#

Dumbest idea I've ever heard. This is why nobody votes for Democrats. Just get rid of the oil subsidies. We're giving tax breaks to companies that are setting records for profits.

|5.1.06 @ 6:49PM|#

Can we at least have an open bid? I think the Demons should up the ante to $150, then the Repukes could counter with $200 and so on.

Come on, don't get cheap on us now boys. Show how much you love us... oh, and no dragging your teeth while you're down there.

|5.1.06 @ 7:43PM|#

It's not like Congress is going to spend $100 less because they are sending you a check. That check is probably costing the government a bit more than $100 due to administrative costs. Plus the $100 will have interest costs because the government will have to borrow more to pay it.

|5.1.06 @ 8:15PM|#

The same politicians that don't understand why most of the public is insulted by the $100 refund idea also wouldn't understand why a whore is insulted when you offer her a finnski for her services. And I have DC Police surveillance video to prove it.

|5.1.06 @ 8:43PM|#

Doesn't anyone else get the feeling pols are acting like rats that have been cornered?
(If someone above had a similar comment, please excuse me.)

Even Joe Shit the rag man (as my drill instructor often referred to him) is wise to the three-card monty out of DC.

|5.1.06 @ 9:13PM|#

So, the Republican solution to a painful economic situation is to borrow some money, give it to us, and then send us a bill for it some day. Instead of, say, cutting the gas tax or easing some regulations or finding some other small government solution to the problem.

Explain to me again why we should vote for them instead of voting for, well, anything else? Like, say, protest candidates or divided government?

|5.1.06 @ 9:16PM|#

It is ammusing how as soon as these government stupidities end up in handouts to us, the calls for government reform slack off.

|5.1.06 @ 9:32PM|#

Well, it'll be another few drops into the debt bucket but I have a V8/RX7 project going on here. Please send checks this way.

That ain't right.

A Mazda RX without a Wankel engine!

|5.1.06 @ 9:34PM|#

Pandering it is.

But I'll take the $100 to feed the Hemi.

|5.1.06 @ 9:38PM|#

Hey, I've got a better idea: The government could just run the printing presses and give us all $100 bills!

Instead of, say, cutting the gas tax or easing some regulations or finding some other small government solution to the problem.

thoreau,
They are Chevy Chase. We are not.
Their sphincters are beginning to form some droplets, however.

Time to scour the attic for pitch-forks and torches.
How many more days 'til Bastille Day?

|5.1.06 @ 9:47PM|#

Remember remember the fifth of November, Ruthless.

|5.2.06 @ 12:06AM|#

|5.2.06 @ 12:49AM|#

Why on earth should we cut the gas tax? It is clearly artificially low as it is. The gas tax is used to pay for the federal highway system, but is insufficient for covering the total. It should be raised until ALL federal road spending is covered by gasoline taxes (rather than income, estate, etc). In addition, gasoline taxes should include the costs of all associated pollution, including CO2, SOx, NOx, and particulates.

An economically-efficient gasoline tax would actually be closer to $1.00-$1.50/gallon, not the 36 cents or so we have now.

Anyone who believes in efficent, fair markets could not possibly support lowering the gasoline tax.

|5.2.06 @ 2:14AM|#

I agree with much of what Chad says. The gas tax should not be lowered simply because the price of gas has gone up -- if only because of the confusing price signal and the uncertain beneficiaries of the sudden surplus.

Moreover, the gas tax is one of the few taxes that actually represents a user fee. The federal tax should be set to exactly cover federal highway costs. It's now in the ballpark: the tax of 18 cents per gallon brings in around $22 billion and highway spending is around $30 billion.

However, the notion that the gas tax should be raised to cover externalized pollution because that is economically efficient is bogus. There is an economically efficient level of taxation for externalities only if the tax revenues go directly to reduce the externalities or compensate those harmed by externalities. Throwing those monies into the general fund is not an adequate substitute and makes the tax not efficient, but punitive -- the very opposite of efficient.

|5.2.06 @ 3:07AM|#

MikeP, raising the gasoline tax to match pollution externalities would product the "optimal" amount of gasoline use, regardless of what we did with the cash. We could burn it, flush it down the toilet, buy everyone a pony, or spend it on whatever our most pressing need is. Indeed, the best thing we could do is spend the money on whatever brings us the most bang for our public buck is, regardless of whether this is related to the environment or not. In the case where the spending is unrelated to the environment, it simply means we are efficiently sacrificing environmental quality for some other good or service. There is nothing wrong with that.

One general thought: How much opposition to the gas tax is an opposition to the gas tax specifically, and how much if it is opposition to "any tax which I pay", which is the norm for most people? If instead of talking about raising the gas tax, one were to propose exchanging a portion of the income tax with a higher gas tax (tax neutral overall), would that sound tempting? Too me, any time we switch from taxing "goods" to "bads" is probably a winner.

|5.2.06 @ 3:49AM|#

That's an interesting take, Chad. Start with a clean slate and the Coase theorem, work out the costs to those harmed, apply them to the consumer as a tax, and then use the money collected for whatever you want. Since the tax is the same whether or not the revenues go to address the harm, and since money is all the same color, the tax is "efficient."

Interesting, but I don't buy it.

Let's say the harm is linear, which will be true in the demand regime moderated by a $1 per gallon pollution tax. Before the tax you have X gallons being burned causing $Y damages to some set of people Z. After the tax you have, say, .9X gallons being burned causing $.9Y damages to the same set of people Z. As theorized, the tax collects $Y in revenue.

All you have done in this example is doubled the burden on the economy. Between burning the gasoline and taxing it, the world is poorer by $1.9Y rather than the $1.0Y before the tax. If you gave the $Y revenue to the people Z, you repair the damage and can argue that the tax is efficient. If you let the government use it at random you might get $.5Y benefit back into the economy. But if you burn it, you're in effect doubling the externality, applying the second half to gasoline consumers.

In the end your approach is social engineering, plain and simple. It's a tax on something you personally dislike. As a double bonus you propose to spend the revenues on something you personally like rather than address the actual problem. There is nothing economically efficient about this approach at all.

|5.2.06 @ 8:18AM|#

Chad-

I don't really disagree with you. I do see a strong case for a gas tax as a user fee for roads. We can debate exactly how much should be tacked onto the gas tax to cover externalities, but I don't really have any principled objections to what you're saying.

My main point is simply that, if we take it as a postulate that the federal government should work to bring down gas prices or relieve the pain caused by high gas prices, then they should look at cutting a tax or repealing a regulation that artificially drives up costs or, well, anything other than the bread and circuses routine.

Hey, maybe they could send us all circus tickets and bread coupons!

Disclaimer for everybody else: Yes, yes, I know, the pricing system that you get from a gas tax probably isn't exactly what you would get from 100% private roads, yes, public roads are inherently immoral and evil, yadda yadda.

|5.2.06 @ 10:58AM|#

thoreau,

I reach back in time to grab your salient comment about reducing gas taxes...

You know, they could just cut gasoline taxes. I've heard good arguments that, however screwed up the market for oil might be, gas stations actually have to compete with each other. So if the tax were cut at the pump, the price would go down.

...to note that, in the current situation, reducing the gas tax in order to relieve the pain of high gas prices won't work.

Gas is $3 a gallon not because there are taxes on it. Gas is $3 a gallon because supplies from the field and from the refinery are tight and demand is high. Removing the gas tax won't change the demand curve, and it won't in the short term change the supply curve. Gas will continue to be $3, but the already high producer surplus will rise even higher by the amount of the tax.

In other words, helping the consumer cope with high gas prices by eliminating the gas tax at the pump will only enrich the villainous oil companies by transferring the tax into their pockets. It is only because the proposed $100 rebate is so distant from the actual transaction that it is a relief scheme at all.

Nonetheless, the rebate is, as you note, pathetic bread and circuses.

Captain Holly|5.2.06 @ 11:07AM|#

Even Joe Shit the rag man (as my drill instructor often referred to him) is wise to the three-card monty out of DC.

My DI's said the same thing. They must learn it in DI school.

|5.2.06 @ 11:40AM|#

MikeP-

Except that right now we have an equilibrium where you pay $3 for that gallon and the supplier gets $3 minus $0.36 (or whatever the tax is) from that transaction. (And yes, I know, he only keeps a small fraction of that after his expenses, but the point is that $2.64 or whatever is enough for him to cover expenses and receive a profit under current market conditions.)

Now, say you cut that tax. The new equilibrium will depend on the degree of competition in the market. Say that the tax is cut by $0.10. A gas station owner's first instinct would, of course, be to keep prices the same. And if he doesn't face much competition then he can keep getting customers. Ditto if he faces competitors but he has some advantages over them (e.g. he offers a full service minimart while the guy across the street hardly offers any amenities, or his station is easy to reach in the layout of the intersection, but the competitor can only be reached by traffic coming from one direction, or whatever).

But if the gas station owner faces significant competition, then the competitor might decide to lower prices slightly. Less than $0.10, perhaps, but still lower. If the competitive situation is tight then he'll start luring customers away. So the first guy in our example will also have to cut prices. And so the customer will receive a significant benefit from cutting the gas tax. The customer might not get the full benefit of the tax cut, but if there's competition he'll get some of it.

Even if there's a situation where one gas station charges more than the other, customers can still benefit from the tax cut. Say that the nicer station is getting away with charging $0.10 more than the guy across the street, because the nicer station has more services or whatever. Now cut the tax by $0.10, and let's say that the cheaper station decides to pass on the savings to the customer. There will be some customers who were willing to pay an extra $0.10 for the nicer station, but a $0.20 difference is enough to get them across the street. The cheaper station will start picking up more business, and so the more expensive station will have to pass on the savings from the gasoline tax cut to keep his customer base.

Of course, that doesn't address the issue of whether gas taxes should be left alone to pay for roads, etc. My only point is that customers would indeed benefit from cutting the gas tax. Whether or not that is sound policy is a whole separate issue.

|5.2.06 @ 12:51PM|#

thoreau,

Your argument about tax reductions being passed to the consumer are correct in general: gas retail is one of the most competitive sectors there is. And the argument would definitely apply to gas back when it was $1.50 a gallon.

But I think we are in a different regime now. Demand is strong and there has not yet been time to adjust to the higher prices. Supply is weak and there has not yet been time to bring new petroleum resources to bear. After watching the price of gas go up 50 cents in a month, I have a hard time believing the producer surplus won't soak up the monies available from any increase in demand due to cutting the tax at the pump.

If demand stays constant while the tax is eliminated, the consumer will indeed get the whole benefit as you argue. But demand won't stay constant. It will rise in response to the drop in price, bidding up the producer surplus at the field and refinery until gas is again $3 at the pump.

The market has already proven it can bear $3 gas. It seems to me that it can bear it again.

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