the truth about the gas tax “holiday”

I really didn’t want this to turn into a political blog, but it seems that i don’t have much choice.

Don’t believe the hype about the gas tax holiday.

John Mccain and Hillary Clinton want to cut the federal gas tax from Memorial day to Labor day. Barrack Obama says this is nothing but hype.

Barrack Obama is right.

Memorial day to Labor Day is the summer vacation period that the gas companies count on you driving to the beach, to grandma’s house, to the amusement park, etc. John Mccain has been vague about how to pay for the tax cut and Hillary some how thinks that she will be able to push through a win fall tax on oil compaines before May 26th.

As John Addams said:
“Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passions, they cannot alter the state of facts and evidence.”

So here are the FACTS

The Fedral Gas Tax rate is 18.4 cents per gallon so by eliminating it you are saving a whopping $1.84 for every 10 gallons you buy. By eliminating the tax from May 26th to Sept 1st the average motorist will save $29.44. Sounds like a band aid on a bullet hole to me.

Now while it’s saving you $29.44, the estimated cost to the highway fund 9 billion dollars. You see, that 18.4 cents a gallon goes to pay for the maintenance of roads and bridge and tunnels, the infrastructure that has been described as crumbling in recent years. Cutting the tax would mean that highway maintenance programs would be suspended and thousands of construction workers would be laid off.

And she claims she cares about Blue Collar Workers.

So what can the government do? Well a win fall tax on oil companies it a terrible idea. The first thing that any company does when their costs go up and profits go down is lay off workers and pass the expense on to the consumer. The second thing that they will do will be to cancel any plans to increase capacity or research alternative fuels. All which mean the cost of gas will keep going up.

What the government can do is stop cutting rates. It’s not a surprise that when the fed started slashing rates, the price of oil went up. Here is how it works. The fed cuts rates which puts more dollars in the market. More dollars in the market means each dollar is worth less and since oil is an international commodity and it’s priced in dollars, it takes more dollars to buy the same amount of oil. Thankfully todays quarter point cut looks like it will be the last for a while.

But why are we looking at the government to fix this? They have no motivation, and at the end of the day it’s our problem. Want gas prices to come down. BUY LESS. Oil companies make huge profits because we buy their products, so we need to buy less. Period. Since the oil compaines are counting on us to be good little consumers and spend, spend, spend this summer, don’t do it. Skip the vacation. Get a slip and slide, some yard toys and some books for the kids and stay home, grandma will understand. Find local activities though museums, parks, lakes, and libraries to keep the kiddies occupied. Memorial day and Labor day weekend plan a block party with the neighbors. Do a pot luck and grill in the back yard. That has got to sound better than sitting in traffic, waiting on line, and spending a fortune. Stay local this summer and you will save a ton of money and send a message to the gas companies that you just aren’t going to pay ridiculous prices anymore.

You want to make some money on this whole mess? Take the stimulus check you are about to receive and buy stock in one of the oil companies or in a Canadian Royal Trust that focuses on oil and natural gas. After all, we do get the majority of our Oil and Natural gas from Canada at this point. Do a google search for CANROY and you will find a ton of articles and names.

These trusts are great because the pay between 7% and 12% in dividends and most pay monthly. That means that if you spend your $600 stimulus check on shares of Advantage Energy Income Fund, AAV, (the one i own, but this is in no way a recommendation, do your own research!) you would get aprox 49 shares. Their dividend runs about 11 or 12% monthly so that 49 shares would make you about $5.93 this month. That means if you buy on Memorial day, there is a good chance you will make $23.74 by the end of September, but you will keep making money as long as the dividend doesn’t get cut and you hold your shares. That alone will do more to put money in your pocket than any silly gimmicky 3 month gas tax tax cut.

It’s your money. Take it back.

~ by takinitback on April 30, 2008.