Economics of Gas Taxes

Peter Franchot, the MD State Comptroller, has floated the idea of a gas tax holiday over one of the upcoming summer long weekends.

While gas prices have dropped about 10 cents per gallon over the last week, the Maryland average is still about $3.85 a gallon — about a dollar more than the same time last year.

A high-ranking state official who has vowed to fight soaring gas prices is floating the idea of a gas tax holiday, according to 11 News reporter David Collins.

Comptroller Peter Franchot plans to pitch a three-day gas tax holiday to the Maryland General Assembly, Collins reported Thursday.

“We think it would put Maryland on the map, and it would more than pay for itself through increased economic activity,” Franchot said. “Most of all, just give Maryland citizens a break.”

The current state gas tax is 23.4 cents per gallon. At one station Collins visited Thursday, a 15-gallon purchase would cost $56.25. With the gas tax lifted, the bill would have been reduced by $3.50.

I heard Franchot on the radio yesterday, explaining that certainly we can’t do it permanently, because of the revenue loss, but over a weekend the loss of $6 Million in revenue would be offset by increased economic activity, and would be a net gain for state tax revenue, as well as good for residents of the state.

How is it possible he understands eliminating the tax for a short period of time would have a net positive benefit, but doesn’t understand that it would have a positive benefit if it were eliminated permanently?