Japan's Gas Tax Holiday Ends - Lesson for US?

With all the election year noise around a gas-tax hiatus in the US that will never happen (for example Hilary, Obama and economists here, Taxprof roundup , and from Factcheck.org) you may have missed that Japan actually lowered its gas tax for a month, shaving about 17% off the price at the pump during April (more from Asahi News).

Japan's tax holiday wasn't planned. It was the result of a stalemate in the Diet that resulted in the expiration of a "temporary" gas tax increase that has been around for 30 years now. The LDP-controlled Lower house was only able to restore the tax some 30 days after the DPJ-dominated Upper house stalled the extension.

So that set up an interesting situation that provides something of an experiment to test what is being proposed in the US. Now of course there are differences in the behaviours of Japanese and American drivers. But perhaps we can draw some parallels.
1) There wasn't a run a gas. There were a perhaps a few lines at some stations just before the price went up, but nothing particularly major. That could just as well be folks getting a head start on filling up the car before driving somewhere for the Golden Week holidays.
2) The overall economic impact was probably negligible, since the percentage of tax affected by any proposal is relatively small compared to the cost of gas, which is anyway about $6/gallon here.

It'll be interesting to review economic data when it becomes available over the next few months, but I wouldn't expect much impact. The yen exchange rate, fluctuations in exports to the US and China, and higher cost of imported fuel generally, will have a much more important impact.

What was predictable was lots of political finger-pointing, and screams of anguish and woe from all 47 prefectural governors who depend on the tax revenues for all manner of pork-barrel spending. You know that when all 47 prefectures agree on something, that there is money somehow at the root of it!

Does this have any lessons for the US? Probably only that there will be lots of political noise with no real economic impact. So in the meantime, here's some more reading: It seems that markets work. For an excellent round-up of the complete failure of leadership the Reid-Pelosi Congress have made of this, see Gateway Pundit. Although, I shouldn't be surprised because I haven't heard much from the democrats that evidences any kind of understanding about what drives the price of gas!

And, does anyone remember this this Robert Samuelson piece from May 30, 2007? That's when gas prices reached $3.22/gallon, which was nearly equal the inflation adjusted high in 1981. The article runs down the facts that too many have never learned, or merely forgotten. The article ends: Americans want to stop global warming. They want to cut oil imports. They want cheaper energy. Who will tell them that they can't have it all? Not our"leaders."

The more things change, the more the stay the same.

P.S. If you really want to do something useful, don't use your cell phone while driving!
Clip from my hometown news from Madison, Wisconsin. Whether or not to ban cell phone use while driving is still being debated in much of the US, but it has been banned in Japan for a few years now, and there has been demonstrable improvement in road safety as a direct result.