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Shellie shells out

By Michael J. Smith on Thursday May 11, 2006 05:49 PM

My very favorite Democrat has done it again:

Sheldon Silver, the leader of the Democrat-controlled New York State Assembly and probably the most powerful guy in our state government at the moment, has fulfilled an earlier prediction of mine and actually engineered a driving subsidy -- I should say, of course, yet another driving subsidy, since there are already quite a few. Shellie's coup involves jiggering with the state's gasoline tax. As the New York Daily News explains it:

As prices at the pump have soared, so have the state's revenues because of New York's 4% fuel tax.

Yesterday's move would freeze the tax at the rate paid when gas costs $2 a gallon - meaning a motorist would save 5 cents in taxes on a $3.25 gallon of gas.

There's also a provision for localities to cap their own gas taxes similarly. If they take advantage of it, Shellie just cost the state and towns about $450 million. I'll defer to JSP on the economics of this, but my guess is that most of it will end up in the pockets of some part or other of the petroleum sector.

Ironically, the Republican proposal from a couple of weeks ago, so much mocked by the Dems and their journalistic outriders, actually made a lot more economic and ecological sense. Those awful ole Repubs, you recall, wanted to invade the Federal gas tax revenue trough and cut every household in America a check for $100. No encouragement to drive, you see, but a much-needed bit of help that would mean the most to the people who need it the most.

Of course it was a derisory amount, but even so, it was a step in the right direction. My buddy Charlie Komanoff has long urged a hefty carbon tax that would be entirely refunded to the public through offsetting reductions in regressive taxes -- though I personally think sending 'em a check, on a per-household or per-capita basis, would be even better. It's the best of both worlds: a strong economic disincentive for burning fossil fuel, but at the same time a very considerable amelioration of the pain, most effective and significant at the lower end of the income scale. In fact, people who used less than the average amount of fossil fuel would actually make money out of it! What's not to like?

I will stop impersonating a policy wonk now. We return to our regularly scheduled deprogramming.

Comments (4)

js paine:

"my guess is that most of it will end up in the pockets some part or other of the petroleum sector"
i concur doctor smiff

simple fact the wholesale price is whatever they can get away with
cut retail by 5 cents raise
wholesale by five cents like a konga line
you kick left
then i kick left
ends up
some fool
gets kicked in the private parking zone


simple fact the wholesale price is whatever they can get away with

And why shouldn't be? Isn't this a capitocracy? I say let 'em ask $8/gallon and see how that feels.


So NYS imposes a gas tax per dollar of money spend on gas (as opposed to per gallon), the price of gas spikes, the state gets a windfall in gas tax, Silver seeks to allow the people to keep part of that windfall, and it's a driving *subsidy*? Regardless of the merits of high taxes to fund wild government spending, and regardless of the merits of imposing high gas taxes to motivate changes in behavior, it's hardly accurate to desscribe as a subsidy his attempt to decline to increase the effective per-gallon gas tax just because the price of gas increased.

As for who benefits from the lower tax, having lived in plenty of areas where there the gas tax varied as I drove across various political borders, I've seen no evidence that reduced gas taxes don't result in lower prices at the pump. In fact, it's just the opposite. People often drive to the jurisdiction with the lower gas tax because gas is cheaper there. It's a very competitive industry at the pump, and pretty basic economics says most of the savings are going to go to the consumer.

J. Alva Scruggs:

The price of gas is already subsidized heavily, right down to the turtles, with services given gratis to the oil industry in every phase of production. A cap on taxes collected at the pump is a pathetically modest saving for the consumer, most of whose driving habits can't be significantly altered. Divide the windfall by the number of drivers and what do you get? $20, $30 per person per year? The shortfall in services that could have been provided instead, road maintenance, for example, is going to impact them a lot more.

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