Gas Tax Holiday Rhetoric on Both Sides Void of Economic Logic

July 19, 2008

We’ve documented time and time again why most sales tax holidays, including Sen. McCain’s current gas tax holiday proposal, are terrible tax policy. In virtually every setting, the foregone revenue from a tax holiday could be used to finance a better tax cut.

But recently, there has been rhetoric coming from the anti-gas tax holiday side using classically flawed economic logic, almost always involving the word “jobs.” Special interests in the transportation and business sector are arguing that a suspension of the federal gas tax would costs X number of jobs because transportation funding would be less. Of course, reduced funding in transportation would lead to fewer jobs in the transportation sector. But this is the classic economic flaw that Bastiat labeled “What is seen versus what is not seen.”

Special interests constantly use this same perverse logic to convince the public that sports stadiums are worth their money. Obama bought into this ridiculous argument as a state senator in Illinois to support spending taxpayers’ money on a new stadium for the Chicago Bears. Government should not be spending money on sports stadiums or transportation just to build structures, roads and bridges for the purposes of creating jobs that are seen (and politicians can take credit for). The purpose of roads is to provide transportation services to the taxpayer (the end, not the means).

By the logic used by the transportation industry lobbyists against the gas tax holiday, war is a great economic policy because it employs a lot of people, regardless of whether the purpose of the war is justified.

Here’s a good rule of thumb: Anytime you hear some lobby in Washington (or anywhere) talk about how many jobs a certain spending policy will create, you can take it with a huge grain of salt because they always ignore the fact that jobs in other industries are lost.


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