Mar 21, 2022

A gas tax holiday.

A gas tax holiday.

More than 20 states and Congress are considering a change.

I’m Isaac Saul, and this is Tangle: an independent, ad-free, subscriber-supported politics newsletter that summarizes the best arguments from across the political spectrum on the news of the day — then “my take.”

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Today's read: 10 minutes.

Democrats debate a gas tax holiday. Plus, a question about our interns.

Photo: Chris Yarzab
Photo: Chris Yarzab

Podcast.

On Friday, I had one of the most interesting interviews I've ever done in Tangle. I sat down with Scott Tinker to discuss the future of energy in America. Tinker is an energy expert, geologist, and the filmmaker behind the movie "Switch." He calls himself a member of the "radical middle," and explained to me — among other things — why "renewables" don't actually exist, why the energy impoverished parts of the world are his top concern, why he supports nuclear power, and how a combination of energy sources is the only way to solve for the future. You can listen to our interview here.


Quick hits.

  1. The Senate hearings for Supreme Court nominee Kentanji Brown Jackson will begin today. Questioning of Jackson will begin on Tuesday. Separately, Justice Clarence Thomas was hospitalized with a non-Covid infection on Sunday. (The hospitalization)
  2. Rep. Don Young (R-AK) died on Friday. At 88, Young was the oldest current member of Congress. He was the longest serving Republican in the history of the House of Representatives. (The news)
  3. Ukraine rejected a Russian demand to surrender the city of Mariupol, where hundreds of thousands of citizens have been under siege for weeks. (The response) The United Nations says 10 million Ukrainians have now fled their homes. (The numbers)
  4. Former Vice President Mike Pence continues to distance himself from Donald Trump as he eyes a 2024 campaign for president. (The moves)
  5. Texas Gov. Greg Abbott issued an emergency order as wildfires burn in 11 counties across the state. (The fires)

Our 'Quick Hits' section is created in partnership with Ground News, a website and app that rates the bias of news coverage and news outlets.


Today's topic.

Gas taxes. With the average price of gasoline at $4.25 per gallon, politicians are discussing ways to drive the price down. As we covered in Friday's subscribers-only edition on what really drives gas prices, one component of pricing is taxes. Suspending the national gas tax could drive the price down 18 cents per gallon. Some state gas taxes, like California’s, are as high as 58 cents per gallon.

Gas tax holidays have been proposed by elected officials in about 20 states, with proposed lengths ranging from one month to two years to save consumers money. On Friday, Maryland Gov. Larry Hogan announced his state was pausing its state gas tax, which is 36.1 cents a gallon on gasoline and 36.85 cents a gallon on diesel, for 30 days. Georgia Gov. Brian Kemp followed suit shortly after, signing legislation to pause the state's 29 cent tax on gasoline and 32.6 cent tax on diesel until May 31. Some state leaders, like California's Gov. Gavin Newsom, have suggested sending rebates to drivers to help them afford gas.

Meanwhile, legislation to suspend the 18 cent federal tax on gasoline has stalled in Congress. But Sens. Mark Kelley (D-AZ) and Maggie Hassan (D-NH) have proposed a bill that would suspend the federal gas tax until January 1, 2023. Republicans in Congress have spoken out against the gas tax holiday, with Senators like John Thune (R-SD) saying it was “political cover.”

The benefits of a gas tax holiday are not as obvious as they may seem. At the federal level, the tax is levied at the refinery, meaning there's no guarantee the savings would be passed onto consumers. Theoretically, it would free up distributors who set the prices at the pump to reduce them, but it's not a guarantee all of them would. If consumers saw the entire benefit of the tax break, at 29 cents per gallon (Georgia's rate), they would save $4.35 on every 15 gallons of gas.

At the same time, critics worry that the lost tax revenues from these taxes — often used for things like repairing roads, bridges and other infrastructure needs — will need to be replaced.

Below, we're going to take a look at some arguments from the right and left for and against the tax holiday — then my take.


What the left is saying.

  • The left is split on the gas tax holiday, with some arguing that it is a horrible idea that will use up important tax revenue.
  • Others say it is worth driving the price down to help lower income drivers and reduce the chances of a Republican sweep in the midterms.
  • Many point to issues besides taxes as the reason for the high prices.

In Slate, Henry Grabar said "it’s not every day that you see so much political consensus around an idea this bad."

“Flush with cash from COVID relief, Democrats in state government are trying to use their budget surpluses on a tax cut that undermines everything they claim to stand for,” Grabar said. “Lowering the gas tax would be a handout to the rich, harm the environment, and gut funding for public works. Even if the reprieve is meant to be temporary, it will be hard to undo. And it probably won’t move the needle for Democrats in the midterms regardless.

“If Democrats are trying to give the working American a break, the pump is the wrong place to do it. Rich people spend much more money on gas than poor people. According to the Bureau of Labor Statistics Consumer Expenditure Survey, the top 20 percent of Americans by income spent almost three times more on gas in 2020 than the bottom 20 percent," Grabar wrote. "Expensive gas has some positive effects, too. It provides an incentive for American households, companies, and cities to make sustainable plans for the future... the gas tax is supposed to fund infrastructure. Drivers like to think they pay for the roads when they fill up the tank, but in reality, declining gas tax revenue has forced the U.S. to transfer hundreds of billions of dollars of general fund revenue into the Highway Trust Fund over the past decade."

Catherine Rampbell said "these are bad ideas."

“For one thing, the gas tax is a relatively small part of the price consumers pay,” Rampbell wrote. “The federal gas tax is just 18.4 cents per gallon, and state gas taxes and fees average about 30 cents per gallon. Even if those taxes are zeroed out, consumers don’t necessarily capture the full value of the savings. In previous state-level gas-tax holidays in Indiana and Illinois, oil producers captured as much as 30 percent of the savings. And oil producers’ share of the tax cut might be higher under pending proposals.

“Finally, even if consumers did capture all the benefits of a gas-tax holiday, there’s the question of whether this is the most socially responsible way to provide relief to pinched households," Rampbell wrote. "Already, the price of gasoline doesn’t reflect the fuel’s full cost to society from carbon emissions and other pollution. Further subsidizing gasoline — with the biggest benefits going to people with the least fuel-efficient vehicles — isn’t helpful. In the long run, we want incentives that entice people to shift their behavior toward less greenhouse-gas-intensive technologies. Not an implicit government guarantee that gas will always stay cheap.”

In New York Magazine, Ross Barkan said it isn't great policy, but Democrats should do it anyway.

“A $5 gallon could wipe out wage gains and prolong inflation,” Barkan wrote. “Joe Biden and the Democrat-controlled Congress should not be blamed for any of this — Russia’s invasion, a rising demand for gas, and a shale driller pullback are at the root of the surge — but voters will be in a restive mood come November. Democrats, inevitably, will suffer," Barkan wrote. "As antithetical as it may be to their values, progressives and environmentalists should back a gas-tax holiday in New York and support a similar national effort.

“The reasoning is simple enough: Only one party cares about any policy priorities, and that party is endangered,” Barkan added. “If Republicans gain ground in New York while flipping the House and Senate, all plans to combat climate change are put on hold indefinitely. Mitch McConnell and Kevin McCarthy will roadblock Biden through 2024, hoping enough legislative defeats can pave the way for a second Trump term, or Ron DeSantis, or some other retrograde president. The rest of the 2020s would look quite grim. It may well be true that nothing Democrats do will save them from enormous losses in November. Such nihilism, though, shouldn’t deter politicians and activists from fighting to do what they can to stave off defeat.”


What the right is saying.  

  • Conservatives are critical of any taxes on and regulation of fossil fuels, and skeptical a gas tax holiday would help much at this moment.
  • Many call out Democrats' hypocrisy for wanting a tax holiday now, with election season coming.
  • Some say Democrats are essentially raising taxes and then redistributing that money back to Americans to 'buy votes.'

In City Journal, Steven Malanga criticized gas taxes, though he didn't call for a holiday. "California accomplishes a petroleum hat trick: it hits consumers with high taxes, expensive fuel standards, and regulatory barriers to energy infrastructure," he said.

"The Golden State has the nation’s second-highest gas tax, at $0.53 per gallon (behind only Pennsylvania, which sneakily assesses its $0.58-per-gallon tax on distributors, who then pass it on to consumers). Filling out the top ten highest-taxed states are Washington, New Jersey, New York, Illinois, Ohio, Maryland, North Carolina, and Oregon. At the bottom are Virginia, Missouri, Mississippi, New Mexico, Arizona, Oklahoma, and Texas. The average tax among those states is just $0.18 per gallon. The difference in taxes alone between the lowest- and highest-taxed states can add more than $5 to the fill-up cost of a 14-gallon tank.

"Gas levies are known as “dedicated” or “user” taxes, because in most places governments impose them for the express purpose of financing the infrastructure—roads and bridges—that vehicles use. But as is so often the case, the payoff for increasingly higher taxes is minimal. Indeed, some places with the highest gas levies have among the worst roads," he wrote. "One problem is that the higher the gas levy, the more likely some governments are to snatch the revenues away and use them for other purposes beyond roads. A 2020 Reason Foundation study found that 22 states divert funds away from expenses related to roads. The top five states in this category—led by New York and New Jersey—swipe about one-third of their gas-tax money for other purposes."

The Wall Street Journal editorial board said Democrats first raise gas taxes, and now try to buy votes with gas tax rebates.

"While projecting a $46 billion surplus, Democrats in Sacramento have rejected a gas tax cut," the board said. "They also refuse to relax climate regulations. ‘One thing we cannot do is repeat the mistakes of the past by embracing polluters,’ Mr. Newsom says. Gentry climate progressives favor high gas prices because they make electric cars more attractive. But moderate Democratic legislators are feeling election-year pressure to ease rising prices for low- and middle-class voters. Enter Mr. Newsom’s proposal for a “gas tax rebate.” Unlike broad-based tax cuts, such direct payments let Democrats distribute money to select voter groups. Maybe electric vehicle owners will get a check.

"Illinois Democratic Gov. J.B. Pritzker is also promising to 'alleviate some pressure on Illinois’ working families,' after having doubled the state gas tax to 38 cents a gallon in 2019. His proposal: Suspend this year’s inflation-adjusted gas tax increase (two cents a gallon) and send $300 property tax credits to middle-income homeowners," the board wrote. "That’s about as much as inflation is costing the average household in a single month, and it doesn’t come close to offsetting higher property taxes from increasing housing values and pension payments. The Democratic strategy is to raise taxes and then redistribute a small cut of the revenues to buy votes."

In The Daily Wire, Joseph Curl said a slew of factors has contributed to the increase in gas prices, "including the 25 actions Biden has taken in office which include limiting new oil exploration and [regulating] current production."

"Gas had already soared to $3.59 by February 24, the day Russia invaded Ukraine, which has also contributed to the increase," he wrote. "Calls to suspend gas taxes are also growing on Capitol Hill. Bills are pending in both the House and Senate to create a gas-tax holiday, with each planning to offset lost revenue by using general fund money to fund state highway and public transit programs. Yet there’s no guarantee that doing away with gas taxes will actually help Americans.

"'On average, only about one-third of the value of previous gas tax cuts or tax increases were passed on to consumers, according to a 2020 report from the American Road & Transportation Builders Association that analyzed 113 state gas tax changes enacted over several years. That’s because retail gas prices are influenced by complex factors, including the price of crude oil and supply-and-demand pressures,' ABC reported."


My take.

I feel as if I'm in the Twilight Zone. If you had told me six months ago that Democrats and the White House were going to propose a tax cut for Americans that would create incentives for people to burn more fossil fuels, drive the price of gasoline down, and throw a wrench in some of Biden's plans for infrastructure repairs, all while many Republicans objected, I would have thought you were out of your mind.

And yet here we are. It must be election season.

On the whole, I think this gas tax holiday is a bad idea. Yes, it might nudge the prices down, but it's sort of like taking ibuprofen for a headache when you haven't drunk any water in two days. You're just going to cover up the real causes of your symptoms, and in the long run it's not actually going to make the headache go away.

Even if you're a Democrat terrified of big losses in the midterms, I still don't think it's a good idea. The thought that voters would give Democrats credit for shaving 15 or 20 cents off the price of gasoline at a time when prices are $1.40 higher than they were a year ago strains credulity. Democrats were barely noticed when they started sending hundreds of dollars a month to people through the child tax credit (a failure due in part to their poor messaging).

The belief that they can salvage this, politically, doesn't make any sense. Even though I do think a gas tax holiday would help many poor Americans, given how much more of their income they spend on gasoline than wealthy Americans, I’m not sure this minor pullback would provide much political help after a year of rising prices. It makes even less sense when you consider who a gas tax holiday would benefit the most (the states where gas spending is most important are almost all Republican-led) or how badly it could blow up (it will rightly infuriate environmentalists, who would see the move as confirmation that Democrats will always preserve oil).

On top of all that, it risks throwing Biden’s one major legislative victory to the wind. Remember, Republicans wanted to raise the gas tax to pay for the bipartisan infrastructure bill. Democrats refused, knowing such a move would be used against Biden as both a broken promise he wouldn't raise taxes on middle class Americans and an increase on the price of gasoline. Cutting that tax, though, would almost certainly complicate the funding for infrastructure projects across the country at a time when our roads and bridges are in dire need of some love.

Democrats are in a bad position here, no doubt. Midterms are coming, gas prices are soaring, inflation is up, a new war is destabilizing Europe and the global economy, and all of it is enough for them to seek a quick win with something like a gas tax holiday. But it's not good policy and it almost certainly wouldn't achieve the results they want.

Have thoughts about "my take?" You can reply to this email and write in or leave a comment if you're a subscriber.


Your questions, answered.

Q: I was hoping that Tangle could tell its readers what an intern means to Tangle. I've seen interns at companies ranging from unpaid personal assistants that do grunt work and only gain a line on their resume to paid 'learners.'  I imagine Tangle's interns are somewhere in between the extremes; and I am hoping you'll tell us where they do fall. Are they paid? How many hours are they working? What value is Tangle providing them beyond pay? What services are they giving to Tangle?

— Michael, Elkridge, Maryland

Tangle: Given how small the Tangle team is, our interns generally get lots of hands-on experience. Our last intern, Sydney, was responsible for drafting social media posts and interacting with our readers online. In her last week, she actually published her own piece on climate change. One of our interns before her, Seth Moskowitz, was responsible for researching and crafting our Friday editions. He's now an editor at Persuasion, the news outlet run by Yascha Mounk.

When we interview interns, I have them fill out an application and tell me what kind of experience they want to gain. Then I try to get them that specific experience. Audrey and Rachel are both just starting their second weeks here, but Audrey has so far been a huge help researching arguments related to the daily topic and providing edits to the newsletter pre-publication. Rachel is going to be assisting Magdalena on social media, so I’ll work with her less, but this is definitely not a "get some coffee" type of internship — we need extra hands everywhere, so anyone who comes near the newsletter, social media or podcast is helping in a big way.

We ask for a minimum of 5-10 hours of work a week, and both our interns will receive a three month stipend of $1,500 (about $12.50 to $25 an hour depending how many hours they log each week). In May, we have an intern coming on who is going to get paid and receive class credit, which will be a first for us (and we're going to have to meet certain standards for him to get the class credit).

So far, I think it's been a really successful program, but we're still improving the workflow and communication side of things to ensure interns are getting what they want. Of course, once an intern completes their time here, the biggest value I can add is referring them for a job elsewhere. Journalism is often a "who you know" rather than "what you know" type of business, and if our interns decide to pursue a career in media I’ll do my best to help them. In Seth's case, I like to think that a nice reference letter I wrote to Yascha and his team helped land him the job. As always, it’s your subscriptions and donations that allow us to make Tangle a place that provides mutually beneficial and fulfilling internships.

Want to ask a question? You can reply to this email and write in (it goes straight to my inbox) or fill out this form.


A story that matters.

California provides the U.S. with one-quarter of its food. But three years in, the drought in the state is beginning to strangle the farming industry. In some regions that used to be bustling agriculture sectors, water is disappearing, and with it the farmers, families, and crops that used to dominate the region. "After a rainy and snow-filled December, the state endured its driest start to a year in at least a century," The Washington Post reports. "The end-of-year storms that raised the level of state reservoirs and brought a bounty of essential snow to the Sierra Nevada and Cascade ranges are a distant memory... A survey this month found that the year’s historically dry start has resulted in a snowpack more than 60 percent below average. Not a single major reservoir is filled to its average for this time of year. The one that serves the water district [in San Joaquin], the nation’s largest by area, is less than half full as the state’s wet season ends this month."


Numbers.

  • $4.252. The average price for a gallon of gasoline in the United States today.
  • $4.325. The average price a week ago.
  • $3.532. The average price a month ago.
  • $2.882. The average price a year ago.
  • $3.767. The average price of a gallon of gasoline in Kansas, the lowest of any U.S. state.
  • $5.855. The average price of a gallon of gasoline in California, the highest of any U.S. state.
  • $5.79. The average price of a gallon of gasoline in London, England.
  • $6.48. The average price of a gallon of gasoline in Amsterdam, Netherlands.

Have a nice day.

Mila Kunis and Ashton Kutcher announced that their GoFundMe for Ukraine has raised over $34 million. Kunis, who is Ukrainian, announced the fundraiser a few weeks ago, saying they would send the money to Airbnb and Flexport in order to help house those in need and ship supplies directly to Ukraine. Yesterday, Ukrainian President Volodymyr Zelensky thanked them both on Twitter for their support. It was an especially cool moment for me, given that Ashton is my former boss (I helped him build the positive news website A Plus) and, I know from working with him, an extremely caring guy who regularly uses his platform for good. CNN has a story about the fundraiser.


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