Wednesday, May 07, 2008

Salon is wrong for one simple reason

It misses the point the elasticity of supply for gasoline a state is much higher than it is to the United States as a whole.

As Leonard Burman explains on the NewsHour:
GWEN IFILL: There have been tax holidays proposed at the state levels, because the tax money isn't all federal tax money in a gallon of gas. Does it work differently at a state level? Is it preferable on a state level?

LEONARD BURMAN: Well, it can work at a state level, especially if it's a small state. If the state of Delaware decided to eliminate its gas tax, they could get as much gasoline as they wanted on the free market. They could go anywhere from Pennsylvania to New Jersey.

The problem is that, if you do it at the federal level, that's the entire country. There are no other places within the country where we can get additional gasoline.


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