Summary
A Bush ad released March 30 attacked Kerry for once supporting the “wacky” idea of raising the gasoline tax by 50 cents per gallon. That was a decade ago. More recently, the man who later became Bush’s own chief economist said higher gasoline taxes would lead to “less traffic congestion, safer roads, and reduced risk of global warming” and that raising gasoline taxes 50 cents to pay for a cut in income-tax rates “may be the closest thing to a free lunch that economics has to offer.” How “wacky” is that?
Analysis
As we’ve noted before, Kerry’s support for a 50-cent-a-gallon increase in the gasoline tax happened a decade ago, back when regular was selling for a national average of $1.01 per gallon. Kerry’s support was so fleeting that the only evidence of it to surface so far are two old newspaper clips in which Kerry complains that he deserved more credit as a deficit-cutter. He never voted for, or sponsored, legislation to impose such a tax, and he doesn’t support one now, when the price is just under $1.76.
Bush-Cheney ’04 Ad: “Wacky”
Bush: I’m George W. Bush and I approved this ad.
Announcer: Some people have wacky ideas. Like taxing gasoline more so people drive less. That’s John Kerry. He supported a 50 cent a gallon gas tax. If Kerry’s tax increase were law, the average family would pay $657 more a year.
Raising taxes is a habit of Kerry’s. He supported higher gasoline taxes 11 times. Maybe John Kerry just doesn’t understand what his ideas mean to the rest of us.
Good Policy or “Wacky” Idea?
The Bush ad ridicules Kerry for “wacky ideas” such as “taxing gasoline more so people drive less.” Taxing gasoline is surely unpopular, and never more so than now when prices are hitting record levels. But “wacky?” In fact, the idea of raising gasoline taxes was praised in 1999 by Harvard economist Gregory Mankiw, who is now the chairman of Bush’s Council of Economic Advisers.
Mankiw wrote a Fortune magazine piece that carried the headline: “Tax Gas Now!”
Mankiw: Let’s cut income taxes by 10% and finance it with a 50-cent-per-gallon hike in the gasoline tax. . . .
Cutting income taxes while increasing gasoline taxes would lead to more rapid economic growth, less traffic congestion, safer roads, and reduced risk of global warming–all without jeopardizing long-term fiscal solvency. This may be the closest thing to a free lunch that economics has to offer.
You can read Mankiw’s full article here, on his Harvard Web site.
Overestimating the Cost
The Bush ad also puts the likely cost of a 50-cent tax increase a bit too high, claiming the “average family” would pay $657 per year. But it based that on some very rough figures from a private Web site that based its own calculations on a wrong assumption about the total number of households in the U.S.
Here are the accurate figures: The Federal Highway Administration put total gasoline consumption for highway and commercial use at just over 130.7 billion gallons in 2002, the most recent year on record. That figures to just over 358.1 million gallons per day.
And the Census Bureau put the total number of U.S. households at just under 109.3 million in 2002, also the most recent year for which figures are published.
That figures to just under 3.28 gallons per day per household, which would make a 50-cent increase come to $1.64 per day, or $598 per year.
Not all would be paid at the pump. The figure includes taxes paid on truck fuel, which would be felt in the form of upward pressure on prices of delivered goods.
And the actual figure would be lower to the extent that drivers switched to higher-mileage vehicles or used their vehicles less. Furthermore, advocates of a 50-cent increase call for phasing it in over several years so that the full effects would not be felt immediately. So for many reasons the figure in the Bush ad is an exaggeration, though not a huge one.
Misleading Vote Count
By saying that Kerry “supported higher gasoline taxes 11 times” this ad could give you the idea that Kerry voted for 11 different tax increases, which isn’t true. Actually, a close look at the Bush campaign’s own count shows that nine of the eleven were about a single increase. Five of those votes came in the maneuvering that led to a single 4.3-cent-per-gallon increase in 1993, as part of President Clinton’s economic package. Four more votes for “higher” taxes were actually cast against Republican attempts to repeal that same 4.3-cent increase in 1996, 1998 and 2000. (On one of those votes most Republicans voted against repeal, too.) The Bush campaign also counts a vote in 2000 against a proposal to suspend the federal gasoline tax entirely for six months — which left gasoline taxes unchanged, not “higher.” The 11th instance cited by the Bush campaign wasn’t a vote at all — just that Kerry quote from 1994 that he’d once supported a 50-cent increase.
Media
Watch Bush-Cheney ’04 Ad: “Wacky”
Sources
Jill Zuckman, “Deficit-Watch Group Gives High Marks To 7 N.E. Lawmakers,” The Boston Globe, 1 March 1994.
U.S. Department of Energy, Energy Information Administration, “US Retail Gasoline Historical Prices (Regular)” Excel spreadsheet, 29 March 2004.
N. Gregory Mankiw, ” Gas Tax Now!” Fortune magazine, 24 May 1999.
Bush Cheney ’04, News Release: “Bush-Cheney ’04 Ad Facts – ‘Wacky'” 30 March 2004.
US Census Bureau: ” Table AVG1 . Average Number of People per Household, by Race and Hispanic Origin/1/, Marital Status, Age, and Education of Householder: March 2002.”
Office of Highway Policy Information – Federal Highway Administration, “Highway Statistics 2002” Table MF-21 : Motor Fuel Use 2002 13 Jan 2004.