One other big advantage that writing checks has over suspending the gas tax: When the government sends a check, all of the money goes to consumers. If instead it cuts a tax, some of the money goes to the producers (gas stations, oil companies) because the retail price doesn’t fall as much as the tax does.
The political motivation for suspending the gas tax is strong, says Daniel Clifton, head of policy research at Strategas, because high gas prices aren’t good for incumbent officeholders. One indication that politics are coming into play is that Florida’s Republican-controlled Senate is proposing a fuel tax holiday for the month of October, right before elections. Lawmakers say that’s because October is a light month for tourism and they want the benefits to go to residents. OK, but that’s a long time to wait for help, and judging from the futures market, gas prices are likely to be considerably lower by then.
Today’s inflation is caused by a combination of supply shortages, such as those caused by the war in Ukraine, and strong demand, which was fueled by emergency pandemic aid and job growth. To the degree that strong demand is a culprit, it doesn’t make sense for states to pump a whole lot more money into consumers’ pockets because doing so will simply contribute to more inflation.
So those state checks shouldn’t be too big. States that have big budget surpluses should use some of the money to replenish their rainy-day funds, catch up on contributions to public pension funds and invest in infrastructure, Jared Walczak, vice president of state projects at the Tax Foundation, wrote last year.
The readers write
Regarding your Monday newsletter: President Vladimir Putin of Russia appears to have very strategic goals: the Black Sea ports; Ukraine’s armaments industries (e.g., Antonov in Kyiv, vital for long-distance, heavy-load aircraft needs); military facilities; mineral wealth, e.g., lithium; restoration of the Russian language and customs to the eastern enclaves; prevention of NATO encroachment into Ukraine; and even some of the holiest sites of the Russian Orthodox Christian religion.
This does not appear to be an impulsive invasion. However, many projects are not completed if the costs of completion become so high they are unaffordable. This is the question. Does Russia have the resources to complete the project? If not, it will end at some percentage completion. If yes, then nothing will stop it until it is completed.