Why do I think you are full of soup?

Nope BS in Physics and a Masters in Business/ Engineering Management. I couldn’t even take my graduate level Econometrics class without the 24 credit hours of calculus, differential equations and partial differential equations I had completed.

… oh yeah and several professional certifications including two in finance.

The supply is limited by refinery capacity, already running at maximum, so supply isn’ t going up. That’s a hard constraint; perhaps refinery capacity can be increased, but it takes years (a decade?) to build a new refinery, so over the next few years SUPPLY IS FIXED.

How exactly is a gas tax holiday going to REDUCE demand? Because the only way that prices are going down is if the demand decreases or the supply goes up. If you didn’t learn THAT in 24 credits of econ, you should demand your money back.

With prices staying the same (what the consumer pays), supply staying the same (for which the producer pays), and the producer’s income = (price at pump) - (tax). The producer’s profit is (income)-(cost).

Reducing the tax without increasing the supply simply increases the producer’s income without changing the consumer’s cost or the producer’s cost, ergo it goes directly into profit.

I expect more disengenuous quibbling from WW, but the problem is that the facts and the economic theory (simple Chicago-style microeconomics, at that) are on the other side.

By your comments, you do not appear to be really interested in learning for yourself. Your opinion is preset to the degree that you scorn the concept of reading opinions of those with much, much more experience and education than yourself. Any professors looking for any real in depth thinking rather than just memorizing and knee jerk reactions must find you quite the challenge.

The two I quoted here are not the only ones making this projection by any means. It is a fairly well studied and reported phenomenon.

I generally skip over your comments with all due respect. And I have my doubts the Tax Policy Institute is “non-partisan”. And the UCSD prof is wrong too. FYI - I just got my 24th credit in economics I am proud to report.

In fact, I was simply responding to the hand-wringer who wrongly assumed a gas tax holiday would increase the oil company’s profits.

‘Some economists say that a nationwide “gas tax holiday” would have even less impact on gas prices than temporary state moratoriums, such as the one passed by Illinois in 2000. “It’s basic economics,” said Leonard Burman, director of the Tax Policy Center, a non-partisan thinktank. “Gas is always in very short supply during the summer, which is why prices go up. In order to reduce the price, you would have to increase supply, but that is difficult over the short term, because the refineries cannot add capacity.”

James Hamilton, professor of Economics at the University of California-San Diego, said that most of the benefits from a temporary tax moratorium would likely go to producers rather than consumers. He said that states that suspend gas taxes are able to respond to rising demand more efficiently than the country as a whole, because gasoline supplies can be easily moved from one state to another.

“Prices would certainly rise to the market-clearing level,” said Hamilton. “I would expect the price [of gas] to go back to very close to where it was before [the tax cut], in which case consumers would not see any benefit.” ‘

Dean Baker:

Actually, almost all economists would agree that the tax cut proposed by Senators Clinton and McCain would save consumers nothing. With the supply of gas largely fixed by the capacity of the oil industry (they claim to be running their refineries at full capacity), the price will not change in response to the elimination of the tax. The only difference will be that money that used to go to the government in tax revenues will instead go to the oil industry as higher profits. (My emphasis)

As is typical of any conservative policy proposal, the people who benefit are the people who are the least in need of help.

“The advocates of a “gas tax holiday” are exaggerating the benefits to consumers from their proposal. If the Illinois experience is a guide, there is likely to be some reduction in the price of gas, but it would fall well short of the size of the tax reduction. In order to pay for the tax cut, the government would have to cut back on highway construction and maintenance or find some other way of plugging the shortfall in revenues to the Highway Trust Fund.”