The Free Press, Mankato, MN

Editorials

May 10, 2006

Our View – Gas tax holiday would buy time

editorial board

Two things are for sure in Minnesota right now: Gas prices are high at around $2.70 per gallon, and people are hurting because of it.

That’s why a Republican plan to declare a gas tax holiday might be the quickest and easiest way to get Minnesotans some tax relief. House and Senate members have been working on a plan to provide property tax relief, but that will not likely pass anytime soon as House and Senate members must work out their differences.

Rep. Paul Kohls, R-Victoria, has proposed the gas tax holiday for six months starting July 1 that would suspend collection of the 20 cents per gallon state tax.

That would be about $4 per week over 26 weeks and would amount to about $100 for someone using 20 gallons of gas per week. If you use more gas, you would get more total relief but the same amount per gallon.

The plan would provide about $317 million for tax relief and the loss of revenue to the highway fund would be replenished by money from the Minnesota tax relief fund, which was money set aside for tax relief.

That would be putting the tax relief money to good use and match its purpose. Providing the relief also might set off a round of competition among gasoline retailers to secure more market share with the lower price and lower cost they would be paying.

Using the tax relief fund for gas tax relief instead of property tax relief also would target more taxpayers, and many who are maybe working paycheck to paycheck and who don’t yet have property to take advantage of the property tax relief. That may happen.

Critics argue, correctly, that a tax holiday won’t solve the long-term supply and demand problem, but it could provide some temporary relief until the oil market loosens up.

The U.S. Department of Energy has predicted gasoline prices will average about $2.71 through Sept. 30, and go lower after that. The gas tax holiday also would buy time for Middle East tension to settle a bit. Those tensions have been artificially raising the gas price through speculative futures markets.

If the gas tax holiday is timed right, gas taxes could be re-imposed when prices are lower.

For now, a gas tax holiday seems like a reasonable temporary solution to unreasonable, unusual and unstable market forces.



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