Thoughts, essays, and writings on Liberty. Written by the heirs of Patrick Henry.

“A nation of sheep will beget a government of wolves.”     Edward R. Murrow

May 12, 2011

Quote Of The Day

by Brad Warbiany

From a friend of Billy Beck, relayed on Facebook:

“Oil hearings: Government taxes account for 15% of gas price, company profits only 5%. Follow the dots: The government has 3x the incentive to keep prices high and engage in gouging and restrict further supply as the companies do.”

Wrong. Well, 90% wrong.

The bulk of taxes on gasoline are not charged as a percentage of purchase price, they’re charged as a flat excise cost per gallon. Some states (CA amongst them) also pack a sales tax on top of this, but that’s hardly the key to Congressional hearings, as the federal tax is PURELY a per-gallon tax.

If anything, the Feds actually have an incentive to keep the cost of gas as low as possible, so that Americans will use more of it, and thus pay more excise taxes on that gasoline. In addition, low gas prices help their chances of re-election.

I’ve got my reasons to call the feds hypocritical (they claim to be trying to help the “Average Joe”, but you don’t see them offering temporary reductions in gas taxes) on this issue, but they have no economic incentive to keep prices high. The political incentive is a balancing game between pissing off voters and pissing off environmentalists and NIMBYs, but it’s certainly not a tax revenue game they’re playing.


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