Bush Economist: Gas Tax Cut Not the Answer

The Associated Press
Tuesday, May 2, 2006; 10:54 PM

WASHINGTON -- Cutting gasoline taxes is not a good way for the country to deal with soaring energy prices, President Bush's top economist said Tuesday.

"One of the things we worry about when we cut the tax on gasoline is that it basically stimulates additional use," said Edward Lazear, chairman of the White House's Council of Economic Advisers.

"Over a longer period of time, it would be a significant problem ... because what it would do is it would encourage us to use more oil, not less and that is the way we got to the situation right now," he explained. "That probably is one of the policies that we would like to avoid," he said.

Lazear's comments come as lawmakers on Capitol Hill grapple with ways to provide Americans with relief from rising energy prices.

Oil prices hit a record high of over $75 a barrel in late April; they are now hovering above $74 a barrel. Gasoline prices, meanwhile, are topping $3 a gallon in some areas.

Democrats have promoted the idea of a "tax holiday" by suspending the 18.4 cent a gallon federal gasoline tax for 60 days.

Lazear also raised questions about another idea that has been advocated by Republicans: providing a $100 gasoline rebate to millions of motorists.

"The administration is studying that proposal. It doesn't have the same kind of direct adverse consequence that we just talked about" in terms of a cut in the gasoline tax, he said.

"But there are other issues that we have to think about _ is that the best way to be using our tax revenues? Is it the most efficient way to allocate our resources? And so there are a number of issues that are under study on that," Lazear said of the gasoline rebate.

Lazear made his remarks during a wide-ranging question-and-answer session following a speech that explored, among other things, the gap between the wages of skilled and unskilled workers in the United States.

That wage gap has been visible for decades and "shows no obvious signs of abating in the near future," he said. Improving the education and skills of workers is one important way to help the situation, he said.


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