On the surface at least, giving drivers a summertime "holiday" on the 18.4 cent federal gasoline tax sounds like a good idea.
The proposal, first made by Republican presidential candidate John McCain, is now being supported by Democratic candidate Hillary Clinton.
Too bad the idea flunks basic Economics 101.
“Unless the goal is to temporarily boost profits for petroleum refineries and foreign producers, the proposal makes no sense,” says Len Burman, director of the Tax Policy Center.
The reason is basic market dynamics. Supply is relatively tight, so any drop in pump prices would encourage even more demand when it is already rising with the traditional summer driving season.
That in turn could bump up prices, so any benefit to drivers from the a tax holiday could likely be temporary. Burman, in fact, says prices would rebound almost "immediately" because supply could not be ramped up quickly enough.
That leads to our Fast Money Reader Poll. Do you think repealing the federal gas tax for the summer is a good idea?
> Gas-Tax Holiday Wouldn't Lower Prices at the Pump
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