The Gas Tax Holiday Explained: Something We Need
Vince Leibowitz | May 02, 2006 | Comments 3
I just got done with a conference call with Rep. Trey Martinez-Fischer concerning HB 120, the bill to create the Gas Tax Holiday, which currently has a good number of House Sponsors.
The Gas Tax Holiday is an excellent piece of legislation that I think hasn’t received either it’s fair share of ink or attention from the MainStream Media. I also believe that a lot of folks really do not understand how the holiday will be funded, so I will attempt to explain some of that here.
First, though, I want to direct you over to the excellent Website that Rep. Martinez Fischer has put up, GasTaxCut.com. It’s got a blog, a page where you can get all the facts on the proposal, a link for you to sign the petition supporting the gas tax cut, and even a link to help you find cheap gas in your area. Make sure to check out this blog post, which details Rep. Martinez Fischer’s inspiration for writing this bill. It’s a poignant story that is another example of Democrats supporting “real people policies.”
Now, let’s talk about the bill, the relief it proposes, how it would be paid for and how much it will save us.
Let’s first talk about the relief proposed by the bill. The bill proposes a 90-day “holiday” during which time the state will suspend collection of the 20-cent-per-gallon tax on gasoline and diesel fuel. The relief would be effective immediately upon gubernatoral approval, provided it were to gain 2/3rds vote in both the Senate and the House. Essentially, it’s coming just in time for the summer months when everyone is traveling.
The cost of the gas tax is estimated by Rep. Martinez Fisher at costing the state somewhere between $680 and $700 million dollars.
Addressing how the bill would be paid for, there are actually two possibilities. The one which Rep. Martinez Fischer supports is using is money the state is due to receive as part of the Equity Bonus Program mandated under SAFE-T, the Safe, Accuntable, Flexible, Efficient Transportation Act (aka, the federal highway bill). Texas is due to receive this money (a total of $788.1 billion over several years) because we are a “donor state” meaning we do not get back every single dollar we send the federal government in revenue for federal gas taxes that we pay for at the pump. This money, as explained by Rep. Martinez Fischer, is unappropriated and not earmarked because the state received notification of the revenue after the close of the last regular session of the legislature in 2005.
I had some questions during the conference call this afternoon concerning whether it was allowable to spend these funds in this manner (i.e, were there any federal restrictions on these dollars) and it’s my understanding using them for gasoline tax relief is not a problem.
However, given that TxDOT probably has ideas of its own about spending this money (including highway construction and the ever-expanding, black hole of cash called the Trans Texas Corridor), and other legislators may have concerns about spending this money, Rep. Martinez Fisher aptly points out that a part of the surplus (less than ten percent) could also be dedicated to the gas tax holiday. Or, some combination of surplus money and Equity Bonus money could be used to fund the gas tax.
I also asked Rep. Martinez Fisher what would happen if the U.S. Congress approved the gas tax relief bill that’s been proposed on Capitol Hill. I had some concerns that, depending upon how Equity Bonus money was appropriated, it may be dependent on future gas tax dollars which may not be forthcoming if the Federal government also initiated a gas tax holiday. Once again, that’s not a problem. This is money already in the federal coffers and money that the state will receive back through the time the federal highway bill is reauthorized again (2009, I believe).
While I support using Equity Bonus money to pay for the proposal, as I think many in the Lege do, the fact is that there are enough options on the table concerning how to fund the “holiday” that no member of the Texas House or Senate should have a valid excuse as to why they aren’t supporting this bill right now.
As for hard numbers on what this will mean to Texas families, those will be forthcoming soon, but right now, I’ll direct your attention to this from GasTaxCut.com:
At .20 cents a gallon, HB 120 takes $4.00 off your gas bill on a 20-gallon tank. That’s like getting 1 1/3 gallons of free gas. If you own more than one vehicle, your savings doubles.
I’ll take issue here and now with anyone who wants to complain about this not being enough tax relief. As Rep. Martinez Fischer very aptly noted during the conference call, “if we can give property tax relief, tax relief to the oil and gas industry, and tax relief to [the] real estate [industry], this is something we should do,” to give tax relief to everyone who drives a car.
This brings up another important point from the conference call as well, which is that some amendments to the Sharp/Perry/TTRC tax plan dealing with taxation of profits on passive investments by Rep. Eddie Rodriguez weren’t successful. So-called “passive investments,” often involve investment in oil and gas futures and commodities, as I understand it (and I’m no financial anylist).
Back to the point, though, this does add up to significant savings for Texans. And, I don’t see how the state’s oil and gas lobby can complain about it since it will actually enable people to buy more fuel.
“The gas tax is more aggressive than the sales tax,” Rep. Martinez Fischer pointed out. Why? Here are a couple of reasons:
The gas tax is the most regressive tax, and actually hurts Texas families more than the sales tax, No matter how much money you make, we all have to drive.
According to the Suits Index, the gas tax is the most regressive tax. The Suits Index is often used in tax policy analysis to measure the degree of progressivity of a tax.
Finally, to close, a comment from Rep. Martinez Fischer that I think sums up the reasons for all this very well (and I’ve had to paraphrase this somewhat as I’m having trouble reading my handwritten notes, so any error is mine and not Rep. Martinez Fischer’s):
In its current format [the bill], and with the limited scope of the special session, this is something that we can do today to help texans in this time of plenty [period when the state has a budget surplus].
The price of oil in 2002 was $18 a barrel. Last week, it was at $75.15. Today, on the New York Mercantile Exchange, West Texas Intermediate for June delivery closed up $1.82 at $73.70 per barrel. Light, Sweet Crude (what we produce here in East Texas in places like Kilgore, Van and Gladewater) for June delivery on the NYMEX was up five cents to 73 dollars, 75 cents a barrel.
Those prices aren’t going down any time soon. The Democrats in the Texas House, always conscious of making policy that benefits the people, are offering us some relief from Big Oil. Looking this gifthorse in the mouth would be unthinkable for us, for the Legislature, and for Governor Perry. Sign the petition supporting the gas tax holiday today.
[A big, big "thank you" to Rep. Martinez Fischer and his staff, including Marty Golando, for setting up this informative conference call and inviting bloggers to participate. I encourage you to urge your colleagues to follow suit when they've got important legislation that needs to get to the people.]
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Filed Under: Texas Legislature • Texas Public Policy & Taxation
I just don’t agree at all. I think that a cut in the gas tax will lead to a spike in demand for gasoline. It is exactly this higher demand that is leading to higher and higher prices.
If people want to spend less at the pump, they need to buy less gas. That’s not what people want to hear, but it is the only way to lower prices.
In the long-term, people need to buy vehicles that use less gasoline, preferably no gasoline at all.
[...] I know this because I listened-in on a blogger conference call yesterday with the representative and several other bloggers. Two of those bloggers have done the work already to chronicle the gist of the call and I highly encourage you to check out their posts at Capitol Annex and Off The Kuff. [...]
This tax holiday thing is insane.
First of all, you’re talking twenty cents a gallon, which is laughably small when put in context of $3 a gallon gas prices… well under ten percent.
Second, the monies forgone by the government (state/federal/whoever) are either going to add to the debt (meaning we’ll have to pay it back, WITH INTEREST!), or else are going to collected by taxing somewhere else. These “government giveaways” invariably are coming out of OUR OWN POCKETS, one way or another, and usually at a HIGHER deferred price.
Third, and this is the REAL stinker, the ballooning profits of the oil companies demonstrate pretty conclusively that their pricing has little to do with their acquisition, refining, distribution or other costs… they’re charging the high prices they are simply because THEY CAN. If the price at the pump becomes twenty cents cheaper, then what is going to happen is that the wholesale price of oil will go up twenty cents a gallon (count on it!).
So the result is that we’re NOT rebating money to the consumer, BUT IN FACT transferring yet more government money (our tax dollars!) straight into the pockets of the oil companies!
If we want to really bring down prices in a more meaningful way, the more meaningful ways to do that would include:
1) Aggressive upgrading of CAFE standards for new automobiles, including a stiff “gas guzzler” tax for any automobiles (and including light trucks, vans, SUVs, etc) that get less than (say) 15 miles per gallon (and that number should be increased with each model year);
2) A very aggressive “windfall profits/price gouging” law to force oil companies to pay penalties amounting to virtually all of their ill-gotten gains (i.e. earnings beyond “reasonable and proper”). Much the way the telecommunications industry used to have their prices approved, assuring them a reasonable profit (but not insanely more than that).
3) An Apollo-style program to get the USA off of fossil fuels. This would probably involve major research into nuclear fusion, as well as a heavy push into wind energy and other alternative non-fossil-based energy sources.