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Angie Drobnic Holan
By Angie Drobnic Holan May 6, 2008

Obama's per-car number is reasonable

Sen. Barack Obama says that the gas tax holiday promoted by Sen. Hillary Clinton will save people $28 over the course of the summer. Clinton, meanwhile, claims it will save $70. Who's right?

Obama's campaign cites a number from the American Association of State Highway and Transportation Officials, a group that opposed Sen. John McCain's version of the gas tax holiday because it feared the holiday would wipe out $8.5-billion for highway programs. Clinton proposes a windfall tax on oil company profits to make up the difference.

A spokesman for the highway association walked us through its estimate: The average vehicle drives about 12,000 miles a year. The proposed gas tax holiday would last from Memorial Day to Labor Day, about three months. Assume that people drive 3,000 miles during that time, and assume an average mileage rate of 20 miles per gallon, which comes to 150 gallons of gas. The tax on gasoline is 18.4 cents, so multiply that by 150 gallons, and you get $27.60.

Purists could quibble with a few assumptions here. The estimate doesn't account for diesel fuel, which is taxed at a higher rate of 24.4 cents a gallon. Cars and other two-axle, four-tire vehicles get about 20 miles per gallon on average, but mileage for large trucks is a lot lower, so those drivers would save more. Historical seasonal data also indicates that people drive more in the summer, so the 3,000 number is likely a little low. And another complicating factor is that some individuals own more than one car.

On the other hand, this calculation makes the generous assumption that drivers will reap 100 percent of the tax reduction. Many transportation experts and economists believe that consumers will see only a fraction of that amount, or even none of it. Certainly, oil companies and retailers could decide to keep part of the money for themselves. But a cut in prices will also stimulate demand by making people more willing to use their vehicles. Increased demand is likely to send prices up, eating away at the 18.4 cents a gallon.

"I'm saying no more than half. Some pessimists are saying a lot less than half," said Lee Schipper, an energy expert and visiting fellow at University of California at Berkeley. "Maybe something will come back to consumers, but it's not a big number."

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The Tax Policy Center, for example, published an analysis that says consumers should expect a gas tax holiday to save them only $5 or $10 per vehicle .

Also complicating matters is that the government no longer collects complete data on the public's driving habits, relying instead on estimates. Schipper has found gaps between estimates and actual fuel sales data, as well as uncertainties for both the number of automobiles in use and the distance each is driven.

"We're condemned to endless arguing because there's no good data," he said.

Clinton, on the other hand, arrives at a higher number by calculating savings for a family of four with an average of 2.3 vehicles per household. We examined her claim in detail and concluded it was False .

Obama's statement that a gas tax holiday "would at best provide 30 cents a day for three months for a grand total of $28" is in line with estimates we have for average fuel consumption. The back-of-the-envelope calculation is clearly based on a few assumptions, but the assumptions are reasonable. We rate his statement Mostly True.

Our Sources

CNN, Interview with Barack Obama , May 5, 2008

American Association of State Highway and Transportation Officials, McCain's Gas Tax Holiday Would Devastate Highway and Transit Programs While Saving Motorists an Average of $28 , April 15, 2008

Interview with Tony Dorsey of the American Association of State Highway and Transportation Officials

U.S. Transportation Department, Annual Vehicle Distance Traveled in Miles and Related Data, 2005

Interview with Lee Schipper of the University of California at Berkeley

The Tax Policy Center, A Primer on the Gas Tax Holiday , May 2, 2008

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