Maryland Comptroller Proposes Suspending Summer Gasoline Tax

June 2, 2011

Maryland Comptroller Peter Franchot has floated the idea of suspending the state’s 23.5 cent per gallon gasoline tax during the Fourth of July and Labor Day long weekends:

“It would lose us $2 million a day — that’s $6 million for three days. But I think it would be a big boost for the state’s economy and most of all, it would just give our citizens a break (from high gas prices).”[…]

He believes that drivers from other states would come to Maryland to fill up just because of the novelty of the whole idea.

“People are getting hammered by these high gas prices,” says Franchot.

Howard Gleckman of the left-of-center Tax Policy Center responds:

Joseph J. Doyle and Krislert Samphantharak found that gas stations will pass on some—but not all—of a temporary tax cut to customers. Once the tax holiday ends, gas prices may be higher than before the tax. So yes, people will get something of a break. But not a huge one. And it may not last long.

Keep in mind that even if the entire tax cut were passed on, a typical driver might save about four bucks on a tank of gas.[…]

Then there is the matter of timing. If I am running low on July 3, I might wait to the 4th to fill up so I can take advantage of the tax holiday. The state loses $2 million, but nothing else has changed. In fact, if I was really running on fumes on the 3rd, I might curtail my driving (and other economic activity) for a day so I could make it to the 4th.

Worst of all, though, is the policy signal Franchot is sending. Any sensible government official with an eye on economic, environmental, and geopolitical issues should want to discourage consumption of oil. Instead, he is pandering to those who want to consume more. And, by doing so, he would cost his cash-strapped state millions of desperately-needed dollars.

Maryland and the nation would be a lot better off if politicians such as Franchot doubled the gas tax on holiday weekends, rather than eliminating it.

Readers may remember that in 2008, Republican presidential candidate John McCain proposed a summer gas tax holiday; the idea was essentially a political gimmick that experts understood would not lower prices at the pump.

More on the ineffectiveness of sales tax holidays here, and on gasoline taxes here.

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