The Federal gas tax is currently at 18.4 cents per gallon. John McCain proposes a national holiday of this gas tax between Memorial Day and Labor Day this summer. Let's say his proposal passes through both houses of Congress and President Bush signs it into law. What happens?
1. The 18.4 cent Federal gas tax is no longer charged.
2. The price at the pump drops, say, 15 cents per gallon.
3. People buy more gasoline because it's cheaper! Hurray!
4. Uh oh, the supply of gasoline hasn't actually gone up. The price at the pump creeps back up to $4 to regulate demand as gasoline follows the law of supply and demand.
5. Big Oil pockets the 18.4 cent difference and makes even more money because they don't have this federal tax expense! Hurray for them and their stockholders! Hurray also for the foreign oil companies from whom the U.S. imports over half it oil.
John McCain says "The effect of this 'gas tax holiday' will be an immediate economic stimulus" -- and he's right. It will be an immediate economic stimulus to the Big Oil Companies who are already making record profits. The proposed Federal gas tax holiday will provide zero benefit to the everyday driver, commuter and consumer. John McCain's proposed tax holiday benefits Saudi Aramco, the National Iranian Oil Company, Petróleos de Venezuela, Lukoil, Royal Dutch Shell, Petroleos Mexicano, Petrobras, ExxonMobil, Imperial Oil and all the rest while leaving America with no long term energy strategy.