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[Scott]

There is a proposal that was sent to the Colorado legislature today that would put on the November ballot an option to suspend the 22 cent state gas tax for 90 days. I wish they would do a special election for this issue to cover the summer driving season, but the Christmas driving/ ski season is just as important I guess!

I am doubting that this thing actually makes it to the ballot, but it is interesting to see them try!

[MistressAnne]

I would think that people would benefit from it more if this were to happen in the summer when all of the tourists hit town. It won't make it to the public vote.

[editionPOS]

Typical.  The government is doing the exact opposite of what they should do.  Remember the Great Depression?  Similar mistakes were made.  Gas tax is there because they are trying to cure an externality of gas which is pollution.  Raise the tax decrease the pollution to acceptable levels as people buy less gas.  When gas prises are rising as they have been you do not increase taxes further.  This will create a deadweight loss on the economy and you will see the price of all goods that use gas as an input rise.  Since just about everything is moved by truck this means everything will go up in price.  The economy will slow, GDP will be down.  Dumb!  Lowering the tax to stimulate the economy in the face of rising gas prices would be a better solution.

[editionPOS]

Whoops, I read that wrong!  I thought you said increase the 22 cent tax.  Well suspending it is a great idea in light of recent gas prices.  It pays to have a Republican in office.

[The Asshole]

Typical.  The government is doing the exact opposite of what they should do.  Remember the Great Depression?  Similar mistakes were made.  Gas tax is there because they are trying to cure an externality of gas which is pollution.  Raise the tax decrease the pollution to acceptable levels as people buy less gas.  When gas prises are rising as they have been you do not increase taxes further.  This will create a deadweight loss on the economy and you will see the price of all goods that use gas as an input rise.  Since just about everything is moved by truck this means everything will go up in price.  The economy will slow, GDP will be down.  Dumb!  Lowering the tax to stimulate the economy in the face of rising gas prices would be a better solution.

 
in theory you are partiallly correct and only in the short run and as it applies only to the state of CO,

the US' GDP output will not be drastically affected by the "slowing economy" of a single states do to a slight increase in a locality/municipality tax, decreasing/increasing a minor tax like a gas tax/sales tax doesn't have as big of an impact on the national economy as per say income taxes.

either way i'm not a fond proponent of sole-fiscal policy usage for economic stimulation, IMHO and my my interpritation s of macroeconomic theory monetary policy seams to have a better effect on the national level. i hope it doesn't make it to the public.

[editionPOS]

Any negative effect on the GDP is bad in my eyes.  As GDP indicates the wealth of a nation.  Drastically or otherwise.  Look at the difference small changes in taxes make.  It would not be in the short run either if the tax presented a new price level as it is a factor of production.  Unless that tax is temporary.  But when has that ever happened?  We are still paying a telephone tax that was used to support the Spanish American War from the 20's.  The point is that the government should be adhering to one of the 10 principals of economics that states Government can sometimes improve on markets.  The only way I know how the ghovernment can acctually improve upon markets is to cure an externality that is a cost that is not associated with the price of a good.  We obviously must include the cost on society that is pollution.  The only way to pay for pollution is a tax.  Taxes are incentives, nothing more.  A given amount of pollution is acceptable by society and we tax gas to get us to these socially acceptable levels.  Raising taxes while prices are rising will bring us below this socially accepted level of consumption.  We are now consuming less gas than we should to sustain the previous level of output.  Prises must rise to reflect this increase in cost.  Inccrease in cost leads to a reduction in consumption.  Hence a lower GDP.

The legislative government has no control over monetary policy.  Only fiscal policy.  They both have their limitations though.  My personal belief as a true capitalist is that the invisible hand of the market can and will take care of all problems.  The government tends to create problems.  The Fed does so too.  The last recession we had was because the Fed decided we could not sustain the growth we were and put the brakes on the economy.