Don’t cut gas tax; make the trains free

A central theme of Gov. Ned Lamont’s reelection campaign is cutting state gasoline taxes. In ads that have flooded the airwaves, families, businessmen and women, and drivers all speak about the financial benefit they are expecting because of the governor’s action.

Now President Biden has proposed a three-month federal gas tax holiday. Both the state and the federal gas tax holidays are temporary and largely political. Neither makes much sense economically or, more importantly, environmentally. A far superior policy would be to maintain the taxes on gasoline consumption; I could even argue they should be increased but I won’t for fear of my life or being kicked out of the Democratic Party.

The superior policy that would put more money in the hands of Connecticut households, reduce gas consumption and prices, and contribute to a cleaner environment is to make Metro-North ridership within the state free.

To the governor’s credit, some bus rides are now free. Extending this to the trains would have a significant impact on getting the cars off I-95. We should also prioritize expanding the rail lines between New Haven and Springfield, Mass., with a stop at Bradley. The latter would have a similar salutary impact on I-91 traffic.

According to the U.S. Department of Energy, noncommercial, nonindustrial gasoline consumption (i.e. consumer gasoline consumption) in the state is about 1.2 billion gallons a year. We must remind ourselves that the source of gasoline is nonrenewable, and it transforms into harmful climate-killing gases. At a time when forests are on fire, hurricanes and other violent storms are normal not rare, and sea levels are rising, threatening coasts and food supplies, now is not the time to make gasoline consumption easier.

The six-month state gas tax holiday will cost the state about $150 million. Economists know that this does not mean that Connecticut residents will save $150 million. It is possible, even likely, Connecticut consumers could pay more for gas during the holiday than they do now. Taxes are only a small part of what determines the price of gas. How do you think consumers and taxpayers are going to feel if gas prices do not come down by the 25 cents charged by Connecticut and the 18 cents charged by the federal government?

The wiser long-term strategy would be for the state to make Metro-North train travel within the state free and pay for this with gas tax revenues. Getting people out of their cars needs to be the priority.

This policy addresses both the personal costs of inflation on households and the responsibility of those households to do their part to improve the environment. Making the trains free helps solve the problem of intercity gas consumption but admittedly does little to reduce intracity gasoline consumption. Getting people out of their cars in their commute to work could have significant impacts on demand and ultimately the price of gas.

The age of the gas-powered automobile is coming to an end. State and federal policy should accelerate that transformation, not slow it down. The policy to temporarily suspend gas taxes is nothing more than a gimmick that will not relieve the problem American households are experiencing because of forces beyond their control, and beyond the control of the federal government. To prove this point that inflation is global and beyond politics, consider fact that inflation in the Netherlands is 10.2 percent, in the U.K. it is over 9 percent, in Germany it is 8.7 percent, and in Italy it is 7.3 percent. Inflation in the U.S. is now over 8 percent, which is not unlike what is taking place in other Western economies. Market forces determine gas prices. International comparisons prove the inflation we are experiencing is not about Biden

We and other countries around the world are experiencing inflation because we all experienced a pandemic and all our governments attempted to reduce the impact of that pandemic by pumping out money and programs to support households and consumer to prevent the world and their economies from experiencing something even worse — a depression.

This does not mean we should sit idly by while households suffer. The Biden and Lamont administrations’ reductions in gas taxes, while well-meaning, will not work to ease the pressure on American households.

There are only two ways to reduce inflation and gas prices; one is for demand for gas and other goods and services to decline; and the other is for the supply of gas and other goods and services to increase. Currently, we are experiencing frustrated consumers who want all the things they could get prepandemic — right now — while at the same time the pandemic’s destruction of global supply chains reduced the supply of just about everything. This perfect storm of high demand and low supply is the reason prices of all goods are rising in this country and around the world.

The war in Ukraine is a factor, but inflation pressure predates the war. As painful as this is to hear, inflation is part of the correcting mechanism of global capitalism. Rising prices and rising corporate profits will lead to greater supply as greed replaces fear in the minds of capitalists. And rising prices will begin to reduce consumers’ demand for those same goods and services. We should not forget, that gas prices averaged $2.17 in June 2020 because there was no demand for gas during the lockdown in the early phases of the pandemic.

Making Metro-North train rides free in the state reduces the demand for gasoline, speeds up the necessary adjustments and is good for the environment. The state and federal government should take the resources gas taxes provide and invest heavily in public transportation and the electric vehicle infrastructure.

The current policy of reducing gas taxes is being done under the guise of an anti-inflation policy, but it really has nothing to do with combating inflation and will be ineffective. Let’s not let this inflationary period blind us from what really must be done to reduce gas prices and the inflationary burdens on Connecticut consumers.

As painful as this is to hear, inflation is part of the correcting mechanism of global capitalism.