The Biden administration is looking for ways to deal with high gasoline prices, which are inflicting economic hardship on households across the country. Ideas being discussed include suspending the federal gasoline tax, releasing supplies from the National Petroleum Reserve and providing additional incentives to energy producers, Jeff Stein of the Washington Post reports.
Some Democratic lawmakers are also pushing for a “windfall tax” on big energy companies. On Friday, Sen. Bernie Sanders (I-VT) took the idea one step further, calling for a 95% tax on the excess profits of all major oil and gas companies, many of which have seen their profits rise dramatically during the pandemic. . The tax would be applied to companies that have more than $500 million in revenue, with the level of excess profits determined by the average profits for the five years preceding the Covid-19 crisis.
“Now is the time to tell the 1% and the CEOs of this country that this economy can’t work well for them,” Sanders told the Post. “They can’t keep raising prices.”
However, many economists worry that a windfall tax, whether it hits energy companies or is applied more broadly, could exacerbate existing supply problems by reducing business investment. “You would think drillers would be more hesitant to invest if they think they’ll be taxed for it,” said economist Adam Ozimek of the Economic Innovation Group. “We want to encourage investment, not discourage it.”
But some believe that a punitive windfall tax could be effective in reducing sharp price increases. “If you had an excess profits tax, companies would say, ‘I could raise prices a ton, but those profits will be taxed, so I’ll just keep prices low,'” economist Josh Bivens of the Economic Policy Institute.
Visual Checks of Legislators: A trio of Democratic representatives – Representatives Mike Thompson (CA), John Larson (CT) and Lauren Underwood (IL) – released a proposal to provide direct payments to Americans to help cover the cost of fuel. Under their plan, households under certain income limits ($80,000 per year for single filers and $160,000 for joint filers) would receive up to $100 per month, plus an additional $100 for each person to charge, as long as the national average gas price exceeds $4 per gallon. .
A separate plan Rep. Ro Khanna (D-CA) and Sen. Sheldon Whitehouse (D-RI) would provide rebates to consumers on a quarterly basis, funded by a tax on big oil producers. Companies that produce or import at least 300,000 barrels of oil a day would pay a tax of 50% per barrel on revenue that exceeds a pre-pandemic average. Lawmakers estimate the tax would yield about $45 billion a year if oil prices averaged $120 a barrel, enough to provide about $360 in rebates a year to joint filers earning less than $150,000. .
And California Governor Gavin Newsom (D) announced this week that he wants to offer state residents direct payments of $400 per vehicle, up to a two-vehicle limit. If California lawmakers approve the plan, the checks could arrive as early as July.
The bottom line: There is a lot of talk about lowering fuel prices and attractive proposals to relieve American consumers, but it is not clear that there is enough political will to do so, and it is probably best not to rely on obtaining a rebate check until such money is safely deposited in your bank account.