McCain 'gas-tax holiday' is a campaign retread

Tom Curry National affairs writer • Profile • E-mail

WASHINGTON - If it seems like there is something familiar about the gasoline tax “holiday” being proposed by Sen. John McCain, there is.

You may have heard the Republican presidential nominee propose something similar before — 12 years ago when the GOP nominee’s name was Dole, not McCain.

And more recently, New Jersey Democratic Sen. Bob Menendez, running for election in 2006, proposed the “The Menendez Federal Gas Tax Holiday Amendment,” which would have removed for 60 days the 18-cents-per-gallon federal tax on gasoline and the 24 cents-per-gallon tax on diesel.

What Menendez urged in 2006 is what McCain advocated Tuesday in his speech in Pittsburgh.

“I think high gas taxes are a regressive tax," McCain told CNBC's John Harwood in an interview Tuesday. "The people who drive the furthest are the lowest income Americans. It is incredibly regressive. Where's the fairness there?”

April inspires gas tax cut ideas
Menendez, McCain, and Bob Dole all proposed their tax cuts in April of an election year.

There’s something about the month of April that inspires candidates to think of a voter-pleasing cut in fuel taxes: Many voters are beginning to plan their summer road trips to Grandma’s house or to Yellowstone.

Video Economic agenda April 15: GOP candidate John McCain talks to CNBC’s John Harwood about his economic plan. CNBC

Menendez would have paid for his tax holiday by a windfall tax on oil company profits. McCain’s tax holiday is part of larger tax cut package offset by eliminating earmarks, suspending most discretionary spending, and requiring high-income Medicare beneficiaries to pay more for prescription drugs than less-wealthy people.

McCain also proposed suspending deliveries to the nation's Strategic Petroleum Reserve, another idea which sounds familiar. In April of 1996 President Bill Clinton, running against Dole, announced the government would sell about 12 million barrels of oil from the Strategic Petroleum Reserve (SPR) to help ease gasoline prices.

Defending the McCain idea Tuesday was his senior campaign advisor Charlie Black, a veteran Washington operative who also served as senior strategist for the ‘96 Dole campaign.

“I don't think it's different (than Dole's plan),” Black said. “We know that in the summer gas prices peak and it's when people do a lot of traveling, so if you give them a break just from Memorial Day to Labor Day... if you could do it even just for those three months, it would give people some short-term benefit on inflation.”

Back in 1996, when Dole pushed his tax cut and Clinton sold oil from the SPR to ease drivers' pain, the average U.S. price of gasoline was about $1.36 a gallon, about 14 cents higher than a year before, according to the Associated Press.

Today, according to the U.S. Department of Energy, the price averages $3.39 per gallon, up 51 cents from last April.

An ill omen?
The ill omen for McCain here is that the proposed cut in the gasoline tax didn’t help Dole defeat Clinton in 1996.

In fact Dole, having touted the idea of a cutting gasoline taxes by 4.3 cents per gallon in April of '96, eventually tossed the idea overboard in August, when he offered a new package of tax cuts.

(The 4.3 cent-per-gallon increase in the tax had been passed as part of Clinton’s economic plan in 1993, when cutting the federal budget deficit was the order of the day.)

Donald Rumsfeld, serving as a top policy adviser to the Dole campaign, told reporters in August 1996 that Dole dropped the gasoline tax cut in favor of proposing big reductions in income and capital gains taxes.

Rumsfeld said Dole was focusing on “the big pieces, namely growth in this economy and the circumstances of the American workers.”

Rumsfeld's implication seemed to be that cutting the gas tax by four cents a gallon was pretty small potatoes.

Scolding Dole in 1996
And some in the oil and gas industry scolded Dole for thinking too small.

“If he wants to distinguish himself from Clinton, he should remind people of what the President — urged on by his hyper-environmentalist Vice President (Al Gore) — wanted to do to them with fuel taxes (a 50 cent per gallon increase in taxes), not what he settled for (a mere 4.3 cent-per-gallon tax hike),” said an editorial in the trade publication The Oil and Gas Journal in May ’96.

As Gore recognized back in 1993, higher gasoline prices would encourage conservation and research on non-carbon-based fuels. But since then both Democrats and Republicans alike have been loathe to acknowledge that higher prices could play a useful role in spurring conservation.

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