Monday, July 14, 2008

Psst, Congressman…If You Really Want to Help the Military

..Then consider a repeal of the Hayden-Cartwright Act (4 USC, Section 104). This obscure federal law, passed more than 60 years ago, requires on-base military filling stations to collect taxes on the gasoline they sell. It’s the biggest reason that military customers pay the same price for gas as civilians outside the base gates.

Getting rid of Hayden-Cartwright would not only eliminate the 18.4 cents per gallon federal excise tax (24 cents a gallon for diesel), it would also remove state and local taxes from the purchase price. As this chart from illustrates, elimination of state and local taxes would produce a further savings for young military families, already struggling to make ends meet.

How much would they save? In some states, more than 50 cents a gallon. Multiply that by the weekly or monthly fuel consumption for a typical military family, and the savings add up. Let's say Airman Smith has a daily round-trip commute of 40 miles between her apartment and the base. Her vehicle averages 20 mpg. That's 10 gallons of gas a week, just for the trip between her residence and the office. At $4.00 a gallon, she's paying over $2,000 a year for gas. Eliminating the state and federal gas taxes saves Airman Smith at least $260 a year.

That may not sound like much, but when you're an E-4 making less than $2,000 a month in base pay, it represents a substantial savings. The proposed price break is particularly important for junior enlisted members stationed in high-cost-of-living areas like southern California or the Washington, D.C. metro region.

Attempts to repeal Hayden-Cartwright would lean to charges of "unfair competition," since base service stations could sell gas at significantly lower prices than their off-post competitors. But those claims are exaggerated, for several reasons. First, non-military customers still represent the overwhelmingly majority of consumers in most communities, including those near major bases. The idea that "civilian" gas stations would lose most of their business is ludicrous, since most consumers can't buy fuel (or anything else) on post.

Besides, those civilian outlets have been competing successfully with base gas stations for years, providing tires, parts and service at prices that match--or beat--the military outlets. Additionally, many civilian gas stations offer services not found on base, and they will retain customers who need that expertise--even if they buy gas somewhere else. Additionally, if price is an insurmountable advantage, state and local governments are free to lower their taxes, and make local retailers more competitive with military gas stations.

If the "unfair advantage" argument sounds familiar to members of the armed forces, it's because they've heard it before. At various times, worries about price-cutting and competition have been used to delay a variety of retailing initiatives on military installations, ranging from fast food restaurants, to the sale of certain appliances in base or post exchanges. Breaking down these barriers has been, to borrow a phrase, a long, hard slog.

Retired General Norman Schwartzkopf relayed an example of this obstinacy in his autobiography, It Doesn't Take a Hero. As the ranking officer at Georgia's Fort Stewart in the early 1980s, Schwartzkopf got an earful from the local business community, because the post was one of the first with a Burger King and other fast food establishments “inside the gate.” One businessman claimed his restaurant couldn’t compete and even accused Schwartzkopf of “taking food” from his family’s table.

Such fears were completely unfounded. Almost 30 years later, civilian retail and eating establishments have learned to compete effectively with their on-post counterparts. In fact, we can’t find a single example of an on-base Burger King forcing the closure of a rival establishment outside the gate. True, the on-base restaurant can sell Whoppers for less than a Burger King off-post, but that latter outlet is often open later, has more customer traffic—and higher sales margins.

Repealing Hayden Cartwright may strike some as unfair, since it would only benefit a relatively small segment of the population. But many of those individuals genuinely deserve the break. Today's junior enlisted member is typically married, with small children. Many are ineligible for base housing, or they spend years waiting for quarters to become available.

Without base housing, many young enlisted personnel live miles from the installation, wherever they can a cheap apartment or house to rent. With extended daily commutes, they have been deeply impacted by skyrocketing gas prices, and would benefit most from a repeal of the existing federal law.

In an effort to reduce domestic fuel prices, President Bush has announced plans to lift an executive ban on off-shore drilling. He should follow that action with a second order, authorizing DoD to sell fuel on-base without collecting federal, state and local taxes.

It would be a symbolic gesture, but it would put pressure on Congress to get rid of Hayden- Cartwright, once and for all. For a Democratic Congress that likes to brag about “taking care of the troops,” here’s a chance to match rhetoric with action.


Tom Goering said...

Agreed. They just have to make sure the check the IDs of those purchasing the fuel - most bases in the US have numerous people working without exchange privileges using the on base station. At least in Millington the on base gas price is always about 5-10 cents cheaper than out in town and the cars line up - if it was even cheaper than that the cars would extend to Arkansas :)

George Smiley said...

Navy--You're lucky; at least your installation commander is trying to help members of the community. The Army and AF bases I frequent charge the same price as civilian gas stations outside the gates, and I can usually find cheaper gas off post.

A good friend of mine, a retired CMSgt,fought a running battle with a base commander in Ohio over this very issue. The Chief wondered why the base couldn't collect the required taxes and still set the price lower than competing civilian stations--just as the commander at Millington has done.

In response, the AF Colonel gave my friend the usual song-and-dance about the surveying the market, then setting prices that were "comparable" to the local average. In other words, the good Colonel didn't want the heat from the local Chamber of Commerce or other business groups. And, if it meant more money for the base from AAFES, so much the better.

I'm about to embark on a letter-writing campagin to various Congress-critters, encouraign them to get rid of the tax collection law. There's no reason for a military installation to be a collector for the states and municipalities, and the feds can get by without military personnel cotributing to the highway trust fund when they fill up on base.

It's time to get rid of the law--and give military families a needed break.

And, enforcing the ID requirement shouldn't be that tough.

NotWhoIUsedtoBe said...

They don't do this overseas. Gas was about half as expensive on base in Okinawa.

So what's the point of doing it in CONUS?

NotWhoIUsedtoBe said...

Do they still have the DoD parking stickers on the windshield? It seems to me that that would work just fine if they didn't want to do an ID check.

Geoffy said...

Ummm... part of the beauty of a gas tax is the disincentive it provides for that E-3 to get a more fuel efficient car. Cheaper gas = more driving and more dependence on foreign oil. I think military members should try harder to reduce their gas consumption since they are the ones who go overseas to ensure stability in the oil producing region.