John McCain’s “gas tax holiday” amendment didn’t get very far in the Senate yesterday, but its collapse offered a preview of how the debate over his idea is likely to play out in the coming months.
The short version: Democrats say McCain doesn’t pay for the “holiday” – now one of the central pieces of his economic plan – and Republicans don’t like the way the Democrats want to pay for it.
Senate Minority Whip Jon Kyl, McCain’s Arizona colleague, gave a floor speech about the amendment – part of which is helpfully posted on McCain’s campaign Web site – and then promptly withdrew it yesterday as the Senate finished its work on a highway technical corrections bill. He agreed not to ask for a vote, in part because Democratic Sen. Barbara Boxer of California, who was managing the bill, was complaining about the growing list of Republican amendments.
But it also turned out that the Democrats had discussed offering their own version that would have been funded by eliminating some tax breaks for oil and gas companies. That would have been an uncomfortable version for the Republicans to vote against.
It would have been a natural idea for the Democrats, though – because that’s the version of the “gas tax holiday” that Democratic Sen. Robert Menendez of New Jersey offered two years ago.
In April 2006, Menendez offered an amendment to a supplemental spending bill that would have suspended the 18-cent federal gasoline tax for 60 days, similar to McCain’s campaign proposal to halt the tax between Memorial Day and Labor Day.
The difference, though, is that Menendez would have paid for it by repealing some tax breaks and royalty relief for oil and gas companies. McCain would replace the loss to the Highway Trust Fund by transferring money out of general revenues – but he doesn’t suggest a way to replace those funds.
Democrats consider McCain’s proposal a “corrupted” version of their gas tax holiday idea, as one leadership aide put it, because he doesn’t pay for it. But Kyl, in his floor speech, argued that repealing the tax breaks would be “exactly the wrong medicine” during an economic slowdown because one of them is meant to encourage domestic oil and gas production.
Getting rid of the tax incentive, Kyl said, “would have the effect of raising prices at the pump, as costs obviously would be passed on to consumers. That would obviously have a reverse impact, the exact opposite of what we are trying to do.”
Democrat Hillary Rodham Clinton, however, seems to agree with Menendez. “What I would like to see us do is say, if we have that, then we should have a windfall profits tax on these outrageous profits of the oil companies, and put that money back into the highway trust funds so that we don’t lose out on repair and construction and rebuilding,” she said during Wednesday night’s presidential candidates debate.
Last night, McCain introduced his proposal as a standalone bill. So the argument is likely to continue on the campaign trail. But it’s probably not the last time it will creep back into the Senate, either.
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