Obama Says Illinois' Gas Tax Holiday Didn't Work Lawmakers in Florida and Missouri are giving some thought to a gas tax holiday — something state senators in New York have already voted to do. Presidential hopeful Barack Obama opposes lifting the federal gas tax, in part because of his own experience in the Illinois state legislature.
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Obama Says Illinois' Gas Tax Holiday Didn't Work

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Obama Says Illinois' Gas Tax Holiday Didn't Work

Obama Says Illinois' Gas Tax Holiday Didn't Work

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RENEE MONTAGNE, Host:

NPR's Scott Horsley reports.

SCOTT HORSLEY: Barack Obama has accused Hillary Clinton and John McCain of pandering by suggesting a suspension of the federal gas tax this summer. Obama voted a similar break in the state gas tax as an Illinois state senator eight years ago. He was asked to explain that earlier vote last weekend by NBC's Tim Russert on "Meet the Press."

(SOUNDBITE OF TV SHOW, "MEET THE PRESS")

MONTAGNE: You voted for it.

HORSLEY: I did. Exactly.

MONTAGNE: When gas was only $2 a gallon.

HORSLEY: And that's my point. I voted for it and then six months later we took a look and consumers had not benefited at all, but we had lost revenue.

HORSLEY: Republican State Senator Frank Watson, who proposed the idea, also wanted to help gas stations in his district. They were losing business to neighboring states, where gas wasn't subject to a sales tax.

HORSLEY: Those of us who represent the border areas understood was it was a completive disadvantage for us in Illinois. And we were having people tell us, well, when I go to work I just fill up when I'm over in St. Louis. I don't fill up in Illinois.

HORSLEY: Once the sales tax was lifted, many Illinois drivers stopped crossing the border to buy gas. And executive vice president Bill Fleischli of the Petroleum Marketers Association says as pump prices fell consumers wound up spending more money inside at gas station convenience stores.

MONTAGNE: So the consumers benefited because we sold more inside and we had increased sales of gasoline outside.

HORSLEY: Even though gas prices did fall when the tax was lifted, it's not clear the policy really helped consumers. Executive director Ralph Martire of the Center for Tax and Budget Accountability says wholesale gas prices were falling even faster and gasoline marketers simply kept the difference.

MONTAGNE: These companies basically took what would've been paid as gas tax and pocketed it as profit. And that's one of the inefficiencies you get when you rely on the private sector to pass along the tax break. I mean, they have a profit motive and they're going to use that motive.

HORSLEY: One other lesson from the Illinois expert is that as prices fell that summer and fall, drivers bought more gasoline. Obama said on Meet the Press the U.S. needs to do just the opposite if it wants to lower gas prices in the long run.

HORSLEY: If Senator Clinton or John McCain had stood up in previous years for increases in fuel efficiency standards, in getting serious about an energy policy that is freeing ourselves from dependence on foreign oil, then we would not be in the same situation in the first place.

HORSLEY: Scott Horsley, NPR News.

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