Economic Revisionism

William Polley probably has the most balanced View of the Gas Tax Holiday for the Holiday Season. His Account, though, does not mention Oil companies’ ability to manipulate Production facilities to maximize their absorption of the gains of the Tax Break. Here We are talking about the velocity of Fuel Sales, where Production Costs are minimized rather than Production Output maximized. Production scheduling can greatly expand the elasticity of Tax incidence of the tax remission to the benefit of Oil refiners; it carrying hazard only to Consumers, who will finding factors of Supply constraint generating actually higher Pump prices. Economists may decide I over-think the process, but still, I expect Oil companies will not accept any Sharing with Consumers which they can avoid. Non-cognizant Individuals can understand my Assertion that a Gas Tax Holiday will actually generate higher Gas Prices.

Those who would mistrust my words of wisdom could view this Source, which would break down the statistics in an excellent format to inform little. The numbers simply inform of the expected Gains and Losses, if and only if, all Things operate by one of two separate sets of Expectations. Hardly Anyone expects those Expectations to operate in the manner suggested, and intelligent Observers would not expect even a intermixture of the two Sets. The Whole of what I have written seems like a Cop-out, and so I might turn my Intellect into what is wrong with the Gas Tax itself.

The primary error of the Gas Tax lay in the fact it is a Tax upon Volume. No Tax is efficient taxation which relies on Volume, except and until it is a simple tax on Money itself–i.e., Income. The reason being all Taxes upon Volume will affect the Price of the Product itself; the Tax becomes a percentage of the Price. It devolves into a Production Cost for Producers, and a non-Volume tax upon Consumer Income. The Result consists of Business Suppliers passing the Production Cost to the Consumers, who are burdened by a regressive tax on their Income. Economists enjoy a minor Sunrise trying to account the placement of Tax incidence.

My Proposal of significant genius would be to assign a Tax upon Access to Product, say a $2 fee anytime One turns on a fuel pump. A regressive Tax? Certainly! It, though, would be a regressive tax upon Access, not Volume. Tax Collection becomes simple, a simple Recording of the number of times the fuel pump is Turned On. The Tax is higher than the regressive tax upon Volume, so Tax revenues would be higher, but Consumers can Save on Tax Impact Cost by emptying the Gas tanks before Refills–a sensible Tax impact avoidance. Fuel pump traffic would reduce, lowering the Operating Costs of fuel Stations. Oil companies could not avoid the Tax incidence by alteration of Production schedules, so the principle of Production maximization at minimum Operating Cost would become the guiding Business policy. Economists will find capacity to debate whether a Tax on Access is a more Normal Cost, than is a Tax on Volume of Product. lgl