Score One for Obama

Thom Lambert —  2 May 2008

I’ve been waiting for my old con law prof to take a political stand I could really get behind, and he finally has. Barack Obama is the only one of the presidential candidates to take a firm stand against this shamefully populist gas tax holiday. Good for you, Prof!

Now, I’m not normally a big tax guy. Taxes generally expand the government’s coffers, enabling the state to do more of the stuff I don’t think it should be doing, and lots of taxes (e.g., capital gains taxes, Sen. Obama) create terrible, wealth-destructive incentives. But not all taxes are created equal. Activities that impose costs that are not borne by the people engaging in the activities – negative externalities, to use economic jargon – may be appropriately taxed. Gasoline consumption, which creates all sorts of negative spillovers, is one of those activities.

A friend of mine whom I hadn’t seen for a while came over the other night. I laughed when I realized he’d traded his ridiculous monster truck (he’s a city boy who definitely doesn’t need that much vehicle) for a sensible Honda Civic. “What’s up with the ride?” I asked. “Gas prices,” he replied.

What good greenie (as Hillary is trying to portray herself) or economically astute policymaker (as McCain is trying to portray himself) could think this is a bad thing?

Thom Lambert

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I am a law professor at the University of Missouri Law School. I teach antitrust law, business organizations, and contracts. My scholarship focuses on regulatory theory, with a particular emphasis on antitrust.

4 responses to Score One for Obama

  1. 

    I thought the formal doctrine was “fraud on the market,” from which this blog derived its ironic, less serious title?

    Anyway, Obama’s resistance to this populist claptrap was a defining moment for a number of people, myself included, in our evaluation of the man. It may have been his “Sister Souljah moment” in this race.

  2. 

    I thought this was a serious blog about law and economics; not rambling punditry. You do know where “truth on the market” comes from, right? Its a serious doctrine of securities law. Never mind.

  3. 

    You’re right, Kip. And that’s the point I should have made. (Though I do believe some level of gasoline tax makes sense for Pigouvian reasons — Coasean bargaining’s not an option here.)

    What really drives me nuts is the silliness of subsidizing biofuels, etc. while at the same time making heroic efforts to drive down the price of gasoline. If we want alternative fuels to develop, then let’s let gas prices rise.

  4. 

    You’re confusing opposing the gas tax with opposing the gas tax holiday.

    Maybe a gas tax is a legitimate externality-correcting Pigou tax. Maybe it isn’t. Reasonable people can disagree on that.

    What reasonable people cannot disagree on is that a gas tax cannot possibly be a legitimate externality-correcting Pigou tax on Thanksgiving Day but not on Independence Day. It’s facially absurd.

    To that extent — and only to that extent — do I agree with you that it’s “advantage Obama.”