Fact Check: Dems fight over gas tax

May 5, 2008 12:00:00 AM PDT
Hillary Clinton stepped up her attack on the eve of the Indiana and North Carolina primaries. She's going after Barack Obama on the issue of the federal gas tax.

Clinton's own camp says she needs to win in Indiana and North Carolina and the gas tax issue is one she believes will deliver voters to the polls. Her campaign came out with a new ad this morning that goes after Barack Obama for failing to come up with a solution to high gasoline prices.

"He's attacking Hillary's plan to give you a break on gas prices because he doesn't have one," says the ad.

Fact Check: Economists and energy experts say eliminating the gas tax this summer might drop prices short term , but lower prices would likely increase demand and increased demand would raise prices says the head of UC's Energy Institute.

"Removing the taxes to tell people, 'well go ahead and buy more', I think would be exactly the wrong policy," says Severin Borenstein.

Borenstein adds that if the tax is lifted, refiners would likely raise their prices.

Clinton says her proposal would prevent stations from selling gasoline at an unconscionably excessive price.

House Speaker Nancy Pelosi doesn't believe it.

"There's no reason to believe that any moratorium on the gas tax will be passed on to the consumer. First and foremost, this has not been the history," says Pelosi.

Fact Check: Our partners at FactCheck.org found that unless Clinton's plan suspends the laws of supply and demand, that gas tax holiday won't pay off to consumers. It's a point Obama is making in his latest ad.

Obama's ad says that eliminating that gas tax this summer would only save drivers $25 to $30, or half a tank of gas.

Fact Check: If you buy 15 gallons of gas a week, the gas tax adds up to $2.76. Over three months of summer, that's a savings of $33.12.

Clinton is accurate when she says that Obama doesn't have a plan to lower this summer's gas prices. In his ad, Obama has no short term plan and makes a point of saying that.

Both Obama and Clinton advocate hitting oil companies with a windfall profits tax, but the head of an association of oil companies and refiners tells me that the windfall profit tax of1980 didn't work out so well.

"Our production in the U.S. was reduced three to six percent production of crude oil, and at the same time over those years, our foreign imports went up by eight to sixteen percent," says Joe Sparano with the Western States Petroleum Association.

Fact Check: The oil industry is correct in saying the windfall profit tax didn't work very well, but the 1980 tax was a tax on domestic oil production, not on profits.

And while domestic production fell when the tax was put in place, when the tax was lifted, production continued to decline.


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