Why the "gax tax holiday" won't help you

Hillary Clinton and John McCain are both preposing a "gax tax holiday" in which the federal gas tax, 18.4 cents per gallon, would be eliminated during the summer.  

This is a complete farce, designed to make those without a background in economics actually feel that the candidates are helping them.  They are not.

There are several issues involved, and I will try to break them down one by one.

1. The average person drives 12-15,000 miles per year.  Let's be generous and say you drive 15,000 miles per year, and that you drive an SUV that gets an average of 17 miles per gallon (the average car gets more than that).  During a 3 month period, you would drive 3750 miles and consume 220 gallons of gas.  The "savings" the gas tax would give you in this not-too-realistic circumstance?  $40.59 cents.  About the price of 1 tank of gas.  

2. But wait, that's just the amount of federal tax you'd save.  Let's say that this 18.4 cent tax is removed and people suddenly start driving more.  There is a psychological effect of a tax break: people will use it to buy things they weren't planning on.  In this case, it may be taking a vacation by car.  Demand will almost certainly go up.  Due to good old supply and demand, given a constant supply, the price of gas will go up like wiping out any savings.

3. Where is this money coming from to pay this?  There are 2 possibilities.  Either we get a cash advance on our Central People's Republic Bank of China credit card, or we take the money from where the gas tax goes to: roads.  That's right, get ready for longer waits on potholes being fixed, jobless construction workers, and maybe even a falling bridge.

Hillary and McCain have both seized on this idea and keep running around screaming that it will help out average Americans.  Will $40 really help out the average American, especially if the price goes up to compensate and it turns into a $10 savings that you much more than lose when you need a new tire after you hit the pothole that wasn't fixed because the federal highway administration didn't have enough money?  Sheesh!

The only candidate who is correct about this issue is Obama.  From the beginning, he cited many of the economic reasons above and called it what it is: a gimmick.  Said Obama, "This isn't an idea designed to get you through the summer, it's an idea designed to get them through an election."

Many prominent economists have also chimed in and they all agree that this would not do a damn thing.  

If the government wants to do away with the gas tax, then take my advice from several years ago and just get rid of the tax permanently.  Of course, that would require cutting spending in something... hmm... what are we wasting money on these days...?  Iraq?

Here's a calculator to help you figure out how much you'll "save"