It was a bad idea when Republican Mark Kennedy suggested it in his unsuccessful 2006 run for the U.S. Senate, and it’s still a bad idea when Republican John McCain and Democrat Hillary Rodham Clinton suggest it now. A temporary elimination of the federal gas tax — 18.4 cents a gallon — for the summer driving season is simply a bad idea.

Eliminating the federal gas tax altogether — now, that’s something worth talking about!

Suspending the federal gas tax for the summer has a nice ring to it. That’s why it’s a “populist” idea — it appears to offer something for nothing. Unfortunately, temporarily suspending the gas tax doesn’t provide much benefit; if you’re driving 400 miles a week at 20 mpg, it saves you $56 over 15 weeks — and might actually end up costing you more.

For example:

·  Unlike income or capital-gains taxes, which tax productivity, the gas tax is a consumption tax. In theory, it pays for necessary transportation projects. Suspending the tax depletes expected transportation funding. If the projects it funds are “essential,” they will somehow be built. As theMinnesotaexperience evidences, the money will not come from unessential pet legislative projects. New taxes, anyone?

·  A second consequence of reducing a consumption tax like the federal gas tax is that people will consume more gas rather than less. Temporarily suspending the gas tax doesn’t change the demand curve for gasoline, but it does change the immediate quantity demanded at the new lower price; people will drive more and use more gas at a lower price.

·  On the supply side, even the meager price reduction resulting from suspension of the gas tax will be mitigated by supply and demand. To the degree that an 18-cent reduction affects driving habits, demand will push up prices. If stations don’t raise prices, spot shortages result. When the tax is reinstated, all things being equal, it will be reinstated on a higher base price than would otherwise exist.

So tell me again the economic sense behind increasing the quantity of gas demanded at a time when rising demand and short supply are the underlying problem?

Now, if McCain and Clinton were advocating permanent elimination of the federal gas tax, then we might have something. Cato Institute senior fellows Jerry Taylor and Peter Van Doren make a detailed case for elimination in their paper “Don’t Increase Federal Gasoline Taxes — Abolish Them.”

The economic argument for a gasoline tax, they note, is relatively straightforward: Gasoline consumption imposes costs on third parties. These “externalities” include depletion of a finite resource, environmental costs, congestion costs, national security costs and social costs. If these costs were reflected in higher gasoline prices, the quantity demanded would fall, injured parties would be made whole and gas consumption would be optimal.

But Taylor and Van Doren disagree with that premise. No matter how federal gas taxes are constructed, Taylor and Van Doren say, they always send the wrong signals: They overcharge for road construction and maintenance in low-maintenance climates and undercharge in extreme-temperature Minnesota; they overcharge for pollution costs in North Dakota and undercharge in Los Angeles; they overcharge for congestion reduction in off-peak hours and undercharge during peak congestion periods.

Taylor and Van Doren suggest that if any action is to be taken, tolls, user fees or direct taxes on emissions would be preferable to the blunt instrument of gasoline taxes. Yet they caution that even these measures are bound to have negative consequences and “would likely result in some incremental increase in mass transit use, and that would make the economy less efficient because the economic distortions induced by mass transit are greater than the economic distortions induced by motor vehicle externalities.”

Consider the hoops established in Washington for projects like the Central Corridor light-rail project. I am no fan of the Central Corridor, but even I recognize that the compromises required to meet federal effectiveness standards make the proposed Central Corridor more disruptive to the total transportation system than it needs to be. Ironically, degrading the project is necessary to secure the funding to build it.

Taylor and Van Doren conclude: “We find no compelling reason for a federal gasoline tax at all and call for its repeal.” Far better than a nationwide gas tax is policy that permanently eliminates the inefficient federal gas tax, lets individuals keep more of their earned income and lets local governments closest to the people make decisions about how to collect and spend transportation dollars — and be fully accountable for their decisions.

Craig Westover is a contributing columnist to the Pioneer Press Opinion page and a senior policy fellow at the Minnesota Free Market Institute ( His e-mail address is This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

This column originally appeared in the St. Paul Pioneer Press May 14, 2008.