Senator McCain

On April 15th, Senator John McCain (R-AZ) called for a federal gas tax holiday from Memorial Day to Labor Day to give consumers "an immediate economic stimulus."  Would it?  No, it wouldn't. 

Over that three month period, consumers would see 18.4¢/gallon less federal tax at the pump, but what would happen to the underlying price of gasoline?  It depends upon whether gas stations can supply more gasoline.  Refiners operate at peak capacity over the summer driving season.  If they can't produce any more gasoline in that three month period, then oil companies and gas stations will raise gasoline prices by 18.4¢/gallon to sell the same amount of gasoline as they did before.  All that will have been accomplished will be to transfer the $9 b. cost of this temporary gas tax holiday from the federal government to the oil companies.