29 April 2008


Finally we have a policy difference between Senators Clinton and Obama: the former has jumped on board with John McCain's proposal to suspend the federal gasoline tax over the summer, whereas the latter opposes such a measure. This is the latest maneuver by Senator Clinton to adopt any strategy which will prolong the bloody fight for the Democratic nomination.

This "solution" won't actually help the average motorist: Congressional economists estimate that it would save about $30, on average, over the whole summer tax holiday. Even more importantly, however, it gets the issue exactly back-to-front: the problem isn't that America pays too much for gas, but rather that it pays far too little. Consider that in Massachusetts the total tax on gas (both State and Federal) accounts for something like 12% of the price (and note that the McCain/Clinton plan only affects the Federal slice, which is less than half of the total), whereas in the UK taxes comprise nearly 70% of the price of a litre of petrol.

I don't necessarily advocate European-level fuel taxes, but clearly the US is operating in a fantasyland compared to other modern economies. These taxes have a number of benefits: they raise money to fund public transport and other services, they encourage both fuel conservation and technological innovation (with obvious environmental benefits), and they cushion fuel prices to fluctuations due to oil supply. While Americans have seen prices swing wildly between $2 and $4 over the last couple of years, making it difficult to budget for gas, the price in the UK has slowly, but steadily trickled up by only a few pence.

I seriously hope that Obama stands his ground on this issue.

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