A reader sent me a gated article claiming that Japan’s version of the gax tax holiday passed roughly 100% of the savings on to consumers. But I can’t find any confirmation on google. Does anyone know anything about this? Links?
A reader sent me a gated article claiming that Japan’s version of the gax tax holiday passed roughly 100% of the savings on to consumers. But I can’t find any confirmation on google. Does anyone know anything about this? Links?
May 28 2008
Raphael Franck, a French Israeli professor, has been visting at the Public Choice Center for the last two years. He leaves for good on Saturday. And in the true GMU spirit, we've worked out a bet as a going-away present. The terms, which we have both accepted: If the total number of deaths in France from riots and ...
May 28 2008
Tyler's said this before, but it still flabbergasts me:It's funny how Bryan thinks he can cite my actions as evidence against the correct belief. That's absurd; for instance I also don't act as if determinism is true, but citing that doesn't settle the matter.The best way to persuade people is normally to find a mutua...
May 28 2008
A reader sent me a gated article claiming that Japan's version of the gax tax holiday passed roughly 100% of the savings on to consumers. But I can't find any confirmation on google. Does anyone know anything about this? Links?
READER COMMENTS
David Friedman
May 28 2008 at 11:41am
I’m puzzled at the claim in various places that economists say a gas tax holiday would merely pass the money on to the producers. Even if world supply is perfectly inelastic, one country can still bid gasoline away from another. So one would expect a drop in the gas tax to be partly a gain to domestic consumers, partly a gain to world producers, partly a loss to foreign consumers.
And the smaller the economy effected, the larger the fraction of the savings that would go to domestic consumers–which is consistent with the claim about Japan. Isn’t that obvious?
Bryan Caplan
May 28 2008 at 12:35pm
In reply to David Friendman, what you say is semi-obvious; I said the same thing once before here. I think that many economists would add, though, that for regulatory reasons the U.S. (and often individual states) basically has to do its own refining, and add that our refineries are at capacity. Even if the supply of oil were quite elastic, this implies that – at our current margin – refiners get 100% of the tax cut.
Of course, it would also imply that a large fall in the price of oil wouldn’t reduce the price of gas, at least until we have time to build more refineries. Hmm.
mof
May 28 2008 at 12:38pm
The Nikkei newspaper, Japan’s business daily, reported on this fact in early May. Anecdotal reports confirm that the consumers benefited. I wonder why more US economists do not look at this data. Maybe it is uncomfortable when the real world does not fit models.
From the Nikkei.
Thursday, May 1, 2008
Reimposed Surcharge Pushes Up Retail Gas Prices By Y30 Per Liter
TOKYO (Nikkei)–With provisional gasoline and other road-related tax surcharges reimposed on Thursday, a number of gasoline stations around the country have raised their prices by around 30 yen per liter in a bid to offset the additional 25.1 yen in taxes and higher crude oil costs.
(The Nikkei Thursday evening edition)
Friday, May 2, 2008
89% Of Gas Stations Raised Prices On Tax Surcharge’s Return
TOKYO (Nikkei)–About 89% of gas stations in a Nikkei survey said they hiked prices at the pump Thursday to reflect the restoration that day of the gasoline tax surcharge of 25 yen a liter.
Of the 108 gas stations that raised their prices Thursday, 80% did so by at least 30 yen a liter. The poll drew valid responses from 121 gas stations.
[Comment edited. mof: Please do not violate copyright laws by quoting copyrighted or copy-protected material in full on EconLog. Provide links to quoted material. Please do not repost on EconLog comments you’ve already substantively written on other blogs (e.g., Brad deLong, Grasping Reality with Both Hands. In the future it will be treated as spam.–Econlib Ed.]
Thomas Mueller
May 28 2008 at 12:58pm
Bloomberg: The expiration of the gasoline tax lowered the average price of the fuel nationwide by about 17 percent in April, according to the Bank of Japan. The levy was reinstated this month, bringing regular gasoline prices to a record 160.1 yen a liter ($5.84 a gallon).
While this expiration was more or less involuntary, President Sarkozy proposed a concerted action in a similar vein on the European level yesterday (to no avail, as one may assume).
Ross Williams
May 28 2008 at 1:06pm
I second David’s comment with my own thinking on the matter.
Petrol supplies are actuality quite elastic for each country. Impose a $5 tax on a gallon and producer surplus will not plummet since they can easily shift supplies to a different country. To go the other way then and remove the tax would not simply result in higher profits for the sellers, since petrol from other countries can come back in a regain that producer surplus.
I never liked the economists (not all) criticism of the gas holiday. Just think: if Europe suspended it’s gas taxes do you expect their prices would stay at $7-$10.
Ross Williams
May 28 2008 at 1:13pm
@Bryan
The US in fact refines a significant amount of oil which is then exported to countries such as Mexico. These exports could be reduced as needed to move more petrol to US consumers. I will try to hunt down some more data on your claim that refining must be done domestically for most countries.
Ross Williams
May 28 2008 at 1:50pm
Last post for me
http://www.eia.doe.gov/emeu/cabs/Mexico/Oil.html
Mexico imports 25% of its refined oil consumption, mainly from the US. The US shouldn’t have too much of a problem adjusting to new tax levels.
http://www.dollardrops.com/dollar/2008/05/14/officials-to-weigh-exports-of-japan-refined-gasoline-to-us/
Japan has excess refining capacity, so it should come as no surprise that they were able to increase supplies of petrol.
http://tonto.eia.doe.gov/dnav/pet/hist/wpuleus3w.htm
US refining utilization appears to be below the 10 and 15 year average. While some of this can be explained by extended maintenance needed, there exists excess capacity in the medium run, whatever that is.
I’m sure there exists more evidence to prove this point for other countries as well, though I don’t doubt that restrictions do exist.
aaron
May 28 2008 at 3:58pm
I’m mostly critical of the holiday part.
Also, I think price pressure causes people to do things they think are effient, but aren’t. And may also increase demand through other mechanisms.
Eric Crampton
May 28 2008 at 10:05pm
Bryan,
You argue for the gas tax holiday on the basis that it’s “doing something” while not really doing harm and the gains go to producers. What happens though when voters see that a gas tax holiday has been put in place but fuel prices at the pump haven’t changed much. If folks aren’t up in arms against the oil companies now, what’ll they be like after gas prices fail to move much with the tax cut?
Bob Knaus
May 29 2008 at 6:29am
I thought we’d argued this one to death before. As a gas station owner, taxes are built in to my wholesale price. If my wholesale price drops, I will cut my retail price because I know all my competitors will do the same.
In 2004, Florida cut its tax on gasoline by 8 cents for one month. Gas stations lowered their prices by a similar amount, and then raised them Sept. 1. I remember, I was there. Article
The real reason a gas tax holiday is going nowhere is that, at the federal level, taxes are based on unit volume rather than sales price. Price has tripled since the rate was last set, so we are in effect getting 2/3 of a tax holiday already.
With the resulting decline in fuel consumption pinching the federal highway fund, look for fuel taxes to go up and not down over the long term.
Comments are closed.