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Gas tax holiday plan fuels rivalry

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Gas tax holiday plan fuels rivalry

By Andrew Ward in Washington
Published: May 6 2008 03:00 | Last updated: May 6 2008 03:00

When Hillary Clinton called for the suspension of the federal petrol tax this summer to provide relief from soaring energy prices, Dereje Kitle was the kind of voter she had in mind.

The taxi driver from Charlotte, North Carolina, has seen his daily fuel costs more than double to $55 (€35, £28) in recent months while taxi rates have remained static.

He has to work 17-hour days to support his wife and two children in the US and four sisters in his native Ethiopia. “My sisters think I must be earning big money because I live in America,” he says. “It is hard for me to explain that I cannot afford to send as much to them any more.”

Mrs Clinton’s proposal would ease pressure on Mr Kitle by suspending the 18.4 cents-a-gallon petrol tax between May and September this year, with a windfall profits tax imposed on oil companies to cover the lost revenues.

The plan has become the main flashpoint between Mrs Clinton and Barack Obama, her rival for the Democratic presidential nomination, ahead of today’s primary elections in Indiana and North Carolina.

Mrs Clinton hopes the -populist idea will help seal the victory she needs in -Indiana to maintain her recent momentum, while limiting the scale of Mr Obama’s expected win in North Carolina.

Mr Obama has attacked the proposal as a “Washington gimmick” that highlights his opponent’s calculating approach to -politics.

He says the “gas tax holiday” would save an average family only $30 while doing nothing to solve long-term energy challenges. It was a risky decision for Mr Obama to oppose tax relief for motorists, regardless of the idea’s questionable economic merits.

Á CBS/New York Times poll released on Sunday showed that his principled stance might be resonating with voters, with 70 per cent of those polled agreed that Mrs Clinton and John McCain, the Republican candidate who also favours a “gas tax holiday”, were using the issue for political gain rather than to help average Americans. More people opposed the idea than supported it, by a margin of 49 per cent to 45 per cent.

Mr Kitle is among those who back Mr Obama’s position. “I’m not interested in a gas tax holiday,” he says. “I need a long-term solution, not a temporary one.”

He has already registered his support for Mr Obama in early-voting – the first time he has cast a ballot since becoming a US citizen this year.

While Mr Obama opposes the “gas tax holiday”, he has matched his opponent’s -hostile rhetoric towards the oil industry amid mounting public anger over record energy costs.

According to a recent survey by the Kaiser Family Foundation, 44 per cent of Americans view rising petrol prices as a “serious problem”, making it the country’s top economic concern.

Promises by both candidates to scrap tax breaks for oil companies have received some of the biggest cheers at campaign events across Indiana and North Carolina.

“They do not need your tax dollars to make any more profits,” said Mrs Clinton at a recent rally. She went on to pledge a federal investigation into whether oil companies were manipulating prices, just as Enron once distorted the electricity market. Her mention of Enron – an enduring symbol of corporate greed and malpractice – in the same breath as companies such as ExxonMobil, Shell and BP was clearly intentional.

Oil producing nations have also been targeted, with Mrs Clinton vowing to file a price-fixing complaint through the World Trade Organisation against members of Opec, the oil producers’ cartel. “You would never see me holding hands with the Saudis,” she told supporters recently.

Back in Charlotte, Mr Kitle says he can no longer afford to use petrol to drive the streets in search of -customers and now waits at taxi ranks – further reducing his income just as the economy is slowing.

With his household budget under pressure from soaring grocery prices, he plans to give up the $525 weekly lease on his taxi and seek higher-paying employment. Mr Kitle says he has already secured a new job – as a -petrol station cashier.

Copyright The Financial Times Limited 2008

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