Dusty Right: Gas-Tax Holiday Bad. Dusty Wrong: We Need to Reduce Demand, Not Increase Supply of Fossil Fuel

Congressman Dusty Johnson tweeted yesterday that President Joe Biden’s proposal to suspend the gasoline tax is “a terrible idea” that “steals from our roads and bridges, won’t help consumers, and doesn’t prioritize American energy.” Johnson says the problem is “supply, not taxes.” Johnson says we need to build more refineries, pipelines, and energy infrastructure and allow 15%-ethanol motor fuel year rounds.

South Dakota’s best member of Congress (and that’s a low bar to clear) is entirely right to oppose calling a gasoline tax. He is half-wrong in his diagnosis of the problem and mostly wrong in his solution.

Johnson’s third point against the gas-tax holiday, that it doesn’t “prioritize American energy,” is irrelevant—the point of this specific policy is provide financial relief for American motorists from the price hikes driven by Russia’s war on Ukraine. Enacting this policy or any other to provide financial relief to most Americans does not preclude enacting other policies to “prioritize American energy.” Johnson’s third point is kind of like saying, “Planting tomatoes in the garden won’t improve my protein intake, so planting tomatoes is a terrible idea.” I can plant tomatoes and raise chickens. We could suspend the gasoline tax and pursue other policies to “prioritize American energy”…although we ought to be careful of that phrase, at it sounds like a clever Dusty wonk euphemism for “drill, baby, drill!”

Johnson’s first and second points, however, are valid criticisms of the gas-tax holiday, just like they were in 2008 when John McCain and Hillary Clinton proposed cutting gasoline taxes and Barack Obama called it a “gimmick.” Not taxing gasoline at a time of increasing demand makes no fiscal or practical sense. More people are using the roads, which adds to great backlog of maintenance our roads need. Having just passed a huge infrastructure bill, we should not choke off one important infrastructure funding source for building infrastructure. President Biden says he wants Congress to shift funds to cover any gap in infrastructure funding, but whatever gets shorted, something gets shorted.

There is also no guarantee that Big Oil will respond to a tax cut by knocking 18.4 cents off the price of a gallon of gasoline. The gasoline producers might just put that tax break in their pockets, roll the pump price up another nickel or two, and let drivers take their frustrations out on their ballots. Even if the producers do trickle some of that tax cut down to us common car drivers, that lower price could eat itself: make gasoline cheaper, more people fill up their tanks, demand rises, and inflation strikes again. As Dusty kinda says, taxes aren’t the problem; the gasoline tax is actually helping us reach sooner the point where consumers reduce their consumption, thus reducing demand and bending the inflation curve.

Now we start getting into the problem with Dusty’s well-oiled thinking. (And note, here, “well-oiled” is problematic.) The problem is not supply but demand. Rather than sating the thirst for an addictive and environmentally harmful product whose supply we cannot indefinitely expand, we need to reduce demand so that when gasoline supplies dwindle (or when Big Oil just gets greedy) and prices tick up, more Americans can shrug, substitute other products and services for gasoline and for driving themselves all over kingdom come, and leave Big Oil (and Russia, and the Saudis) high and dry.

Don’t build more oil refineries (and how is federal policy supposed to do that? Nationalize the industry, build federal refineries, and sell Uncle Sam Gas directly to consumers?); promote alternative fuels. Sure, fine, do what Dusty says and let gas stations sell E15 year-round to ease prices for his constituents who have chosen locations and lifestyles that require them to drive 100 miles every day. But expand Dusty’s narrow vision: expand electric vehicle infrastructure (which President Biden is doing), build more bike lanes and trails (which President Biden is doing), expand rail service (which President Biden is doing). And for folks who disdain all those alternatives and still insist on driving cars everywhere, restore and strengthen fuel efficiency standards (which President Biden is doing) so that even our most change-resistant drivers burn less fossil fuel.

Lowering the gasoline tax and cranking up refineries to increase gasoline supply are both bad policies. Both leave us addicted to fossil fuels, ensuring that we face angst and recession every time Russia makes war or Saudi Arabia gets mad or any other petro-political shock occurs. Do everything else President Biden is doing and proposing, and we lay the groundwork for long-term energy and economic stability in which we hum right by those gasoline price signs on our bikes and in our Teslas with as little concern as most of us have when we zip past the price tags for caviar or black powder muskets.