The Wonk Room

A Gas Price Relief Plan That Makes Sense

Our guest blogger is Sam Davis, Policy Analyst at the Center for American Progress Action Fund.

Americans need immediate relief from high oil and gasoline prices and the government needs to respond. We have two options:

1) The McCain, Clinton “gas-tax-holiday” plan which will remove, for three months, the federal tax levied on fuel at the point of consumption — 18.4 cents for each unleaded gallon of gasoline and 24.4 cents for each gallon of diesel; or

2) The Center for American Progress’ “fuel price reliefbate” proposal that would give 80 percent of American households up to $450 and each independent truck driver $4,000 to partially offset their increased expenses due to the exorbitant rise in fuel prices.

Here’s the rub:

The “gas-tax-holiday” plan does not guarantee whether gas stations will lower the price of fuel by any amount once the tax is rescinded. Instead, oil companies could pocket the extra revenue and families save nothing. However, if the gas stations did drop the price, because the higher the income a household earns the more cars they have and the more miles they drive, under the regressive “gas-tax-holiday” plan, they would save more.

The “fuel price reliefbate” plan on the other hand would immediately relieve households who earn the least, but spend the most on gasoline proportionate to their income. While these households drive less and have fewer cars, they experience the hardship of rising gasoline prices the most not only at the pump but in the supermarket as well. This plan would be paid for by repealing the $23.4 billion in subsidies the government gives to oil companies.

Both plans would take the same exact time to enact, yet only one would guarantee immediate relief and can be paid for without dipping into the monies spent to (re)build our national highway system or adding additional taxes.