Saturday, May 3, 2008

Kanjorski Offers Solution to Gas Prices…Taxes

The Times Leader is reporting that Democrat Congressman Paul Kanjorski is offering up a solution to the nation’s fuel problems. That is, he wants to tax oil and gas companies that are making huge profits while consumers pay nearly $4 a gallon. Kanjorski acknowledged that his proposition stands zero chance of passing since the President has promised to veto any such legislation.

The problem with this type of thinking is one of basic economics. You cannot increase the cost of doing business on a company and expect that they are going to simply take that expense out of their profit margin. In truth, less than 10% (see the Cato article) of what you pay at the pump is profit to the gas companies. What will more likely happen is that “big oil” will pass along this increase onto the consumers and still keep fuel prices high.

Congress should consider lowering or outright eliminating taxes on fuel. 18 cents on the gallon is nothing but federal taxes. If states followed suit, there would be an even greater savings to the consumers.

There is a real difficulty here for Democrats. In 2006, many used fuel prices as a campaign issue. The Democrats pledged that if they took control of Congress they would lower fuel costs. Instead, fuel costs at the pump have increased dramatically. This creates a quandary for Democrats going into this Election cycle.

Fuel costs are of great concern to everyone. They affect consumers across the income scale. I would respectfully submit that taxes are not the answer. I cannot recall a business tax increase that resulted in lower prices to consumers.

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