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Capitol
Watch > 2008 Bill Ratings
GAS TAX HOLIDAY S.7594-B (Lanza, et al.)
Explanation In an effort to relieve the pressure of high gas prices on their constituents, lawmakers at both the federal and state levels have proposed a gas tax “holiday” for the Summer of 2008. While popular with voters, a tax suspension is deeply flawed from both an environmental and an economic policy perspective.
The combustion of fossil fuels from the transportation sector already results in negative impacts on New York’s air quality and is a major source of the pollution that causes global warming. Reducing gasoline prices by suspending taxes encourages consumers to drive more. It also removes the economic incentive to switch to mass transit and less polluting forms of transportation. Instead, initiatives that encourage switching to clean and renewable sources of energy, using mass transit systems, and promoting higher fuel-economy vehicles would all generate real economic and environmental gains. As a general rule, Environmental Advocates of New York opposes any proposal that would result in increased consumption of fossil fuels.
In addition to the negative environmental consequences of a gas tax holiday, this proposal is likely to result in little savings to consumers. It may have the perverse effect of actually raising gasoline costs.
Even with provisions requiring retailers and distributors to reduce gas prices, it is unlikely that consumers will realize any savings as a result of this proposal. This is due to the fact that the price of gas is influenced by the manner fuel taxes are assessed in New York, as well as the way fuel prices fluctuate on a scale that is much longer than the proposed three-month adjustment.
Lowering the price of any commodity is likely to increase demand. During the summer months, refineries already operate at near maximum capacity in order to meet summer travel demands, leaving little or no room to increase supply. The end result of this equation is that suspending the gas tax could actually drive up prices by artificially stimulating demand, further eroding any savings that might be realized by consumers. Environmental Advocates is also concerned about lost state revenue. Although it is unlikely that this bill will ensure real consumer savings, it would guarantee the loss of more than $500 million in state tax revenue during the suspension. Most of this revenue supports highway and bridge improvements, the costs of which must be covered. Creating such a large hole in the state’s financial plan increases the likelihood that resources intended to support environmental projects or to enhance environmental protection would be diverted to other purposes.
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