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Dissecting the Gas Tax
Holiday
By Charles Delvalle
I haven’t gone
on a political tirade in a good while (or as my friends would say, in a
hot minute). But the one I’m about to go on could really affect the way we
look at the economy in the future.
So let me start
from the beginning.
The Presidential
election is about seven months away. And at this point in the game, it’s
time for the candidates to really talk about what they would do if they
were president.
So John McCain
comes up with a swell suggestion (yeah, that’s sarcasm).
John basically
says that he understands that higher gas prices are really affecting the
way consumers spend. He knows that when people see gas ten cents higher
every week, it puts a damper on their good mood.
So John offered
a solution. He says, hey, if we roll back the gas tax during the summer,
then everyone will have more money to spend and that should give the
economy a lift.
The gas tax is
18.4 cents per gallon. So instead of paying $3.50, I’ll pay $3.32. My gas
tank is 17 gallons and I fill it up four times a month. So for me, I’d end
up saving a whopping $12.24 every single month.
Want to know
what I plan on buying with that massive savings? Food. That’s right, this
$12 extra dollars a month should give me just enough to cover the rising
costs of wheat, corn, rice, and meat. I realize that this tax holiday
gives truckers and those who travel a lot, a much larger
benefit.
But did you know
that if the gas tax is cut for three months out of the year, then the
crews that repair our busted bridges and roads won’t be able to work as
long. That’s because this gas tax goes directly to what they
do.
So how does the
government fix that? They can lay off workers, raise taxes somewhere else,
or let the deficits rack up.
With McCain in
office, I can tell you he wouldn’t raise taxes. He’s made that point very
clear. If he’s into cutting spending as much as he says he is, then he’ll
lay off workers right in the middle of a recession. And if he doesn’t have
the political muscle to get a spending cut through congress, then the cost
of that gas tax holiday contributes to more deficit spending.
And those aren’t
even the worst things about this tax holiday. According to the New York
Times, this holiday could actually increase the demand for gasoline (since
prices are lower) which could increase the price of gas. In other words,
the gas tax would benefit the sheiks in the Middle East.
So it appears
that McCain has it backwards. Cutting the gas tax is nothing more than a
move to get people to vote for him.
Heck, why
doesn’t he advocate cutting the tax on a pack of cigarettes. I’m sure all
the people getting laid off or realizing that food will cost them $50 more
every month might get stressed out and want to smoke.
The truth is gas
in the United States is some of the cheapest in the world. The tax we have
on gas is also one of the lowest among industrialized nations. We pay
roughly five percent in tax. Europe on the other hand pays about 70
percent. We shouldn’t be looking at the gas tax as a fix for
anything.
The solution to
higher gas prices is really far more complicated than a reduction of an 18
cent tax. The solution is in moving away from gas entirely. This would
create newer, higher paying jobs that would help the economy down the
road. Plus, it would lessen the impact gasoline has on
inflation.
If McCain really
wants a quick way to help the economy, he could look at ending the whole
corn-based ethanol craze. If it weren’t for food being used for energy,
the price of food would never have popped as high as it has.
Did you know
that the price of rice has jumped nearly 500% in just four to five years?
Or the price of corn is three times more expensive than just three years
ago? Wheat, soybeans, and meat are all increasing too.
Plus, corn-based
ethanol is a stupid fuel anyway. It barely produces more energy than it
takes to create the stuff. And even that is up for debate.
But instead,
McCain wants to offer a tax cut that does nothing to address any of the
problems we have right now.
Tell me, how
does this tax cut help the dollar? How does it cut back deficit spending?
How does it help move the U.S. away from gasoline consumption? How does it
create more jobs? How does it increase GDP? It won’t do any of those
things and in fact, will do the exact opposite.
So how does this help you? Well, if the gas tax holiday actually
passes congress early this summer, you can expect oil prices to rise. So
you can buy the United States Oil Fund ETF
(USO).
As this tax cut does nothing to help the dollar, you could buy the
Streettracks Gold Trust (GLD) or even better, the
iShares Silver Trust (SLV). These two ETFs will continue to do well as the dollar
falls.
Another very
important lesson is that change is fleeting. In other words it’s very rare
to see a real substantial change in politics. And even rarer is when that
change actually helps instead of hurts our economy.
McCain, Clinton,
and Obama all have misguided economic policies they hope will work. But
you can be sure that the same old things that happened in the past are
sure to continue.
As long as you
can keep that in mind, then you’ll never be shocked by mindless government
actions that aren’t good for anyone. Not to mention you’ll have the lucky
shot at making some easy cash from it.
Until next
time,
Charles
P.S. To let
me know what you thought of today's article, send an e-mail to:
feedback@investorsdailyedge.com
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