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Some Lawmakers Want to Ease the Pain of High Gas Prices With Direct Payments to Americans

David Paul Morris | Bloomberg | Getty Images
  • High gas prices, which average $4.24 per gallon, are straining Americans' budgets.
  • Some Democratic lawmakers are stepping in with proposals to provide direct rebates to Americans to help reduce the pinch.
  • But those proposals, which are happening at the federal level in Washington and in California, may not make sense amid current economic conditions, one expert says.

High gas prices have put a strain on many Americans' budgets.

Now some Democratic lawmakers are proposing a possible solution: direct rebate payments to Americans.

Three congressional leaders have proposed $100 energy rebate payments that would be sent to Americans during any month where the national average gas price is higher than $4 per gallon.

The bill — called the Gas Rebate Act of 2022 — was proposed by Reps. Mike Thompson, D-Calif.; John Larson, D-Conn.; and Lauren Underwood, D-Ill..

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Other Washington Democrats have issued proposals. Rep. Ro Khanna of California and Sen. Sheldon Whitehouse of Rhode Island have suggested raising taxes on big oil companies and paying rebates of roughly $240 per year for single filers and $360 per year to joint filers.

Rep. Peter DeFazio, a Democrat from Oregon, has also proposed a bill that would tax oil companies and provide rebates to consumers.

Separately in California, Democratic Gov. Gavin Newsom has a plan to give $400 debit cards to the state's registered vehicle owners. Drivers would be eligible to receive up to two of those tax refund payments.

The proposals come as gas prices around the country have soared in the wake of Russia's invasion of Ukraine, though costs at the pump had already started climbing before the conflict.

The national average for a gallon of gas is currently $4.24, according to AAA, up from $3.54 a month ago and $2.87 a year ago.

Prices vary around the country, with states in the Northeast and the West currently facing the highest prices.

California is one of those states, with an average price per gallon of $5.88. That's up from $4.77 a month ago and $3.88 a year ago.

Lawmakers have been in search of creative solutions to help ease consumers' pain as record high inflation pushes up prices everywhere.

States, including Maryland and Georgia, are in the process of implementing gas tax holidays. Legislation to temporarily suspend the federal gas tax has also been proposed.

Critics have taken issue with temporarily suspending those taxes, because they help fund road maintenance and may not result in big savings for drivers.

The proposed rebates would be an improvement from a gas tax suspension, according to Alex Muresianu, a federal policy analyst at the Tax Foundation, as they wouldn't run the risk of pushing up demand for gas.

But it might not make sense to just target drivers when consumer prices are high overall. "That matters for people who are lower income and don't drive, too," Muresianu said.

Moreover, current economic conditions don't strengthen the argument for more stimulus payments.

"It doesn't make sense when the economy is running very hot, unemployment is low and inflation is very high," Muresianu said.

How the federal proposals could work

Gas prices stay high as people line up for discounted prices at Costco. Regular at $5.39 per gallon.
Robert Gauthier | Los Angeles Times | Getty Images
Gas prices stay high as people line up for discounted prices at Costco. Regular at $5.39 per gallon.

Under Washington Democrats' Gas Rebate Act of 2022 proposal, the energy rebate payments would amount to $100 per month, plus $100 per eligible dependent.

Full payments would go to single filers earning less than $75,000 and gradually phase out for those with incomes up to $80,000.

Married couples who file jointly with up to $150,000 in income would be eligible for full payments, which would then phase out for those with up to $160,000 in earnings.

Khanna and Whitehouse's proposal for rebates of about $240 per year for single filers and $360 per year for joint filers would also phase out for those earning over $75,000 or $150,000, respectively.

It is unclear how much the rebates under DeFazio's plan would amount to for individuals and families, though those would also be based on similar criteria to the stimulus payments made through the American Rescue Plan.

To be sure, it is uncertain whether the proposals could garner enough political support on both sides of the aisle to pass.

Democrats' Build Back Better package, which included additional monthly child tax credit payments of up to $300 per child, has stalled on Capitol Hill. Consequently, it is unclear whether there is political appetite to send more direct payments to Americans at this time.

How California's plan aims to help

California Governor Gavin Newsom speaks at a press conference in Oakland, California, on Wednesday, on Feb. 9, 2022.
Medianews Group/east Bay Times Via Getty Images | Medianews Group | Getty Images
California Governor Gavin Newsom speaks at a press conference in Oakland, California, on Wednesday, on Feb. 9, 2022.

Newsom's proposal would include up to two $400 rebates per vehicle for as many as two vehicles, which would be paid to drivers via debit cards.

Eligibility would be determined by vehicle registration, not tax records. That would make it easier to get the money to low-income non-tax filers or people who live on Social Security disability benefits, for example, according to Newsom's office.

There would be no income caps in order to qualify for the rebates.

Newsom is also proposing a pause to part of the sales tax on diesel for one year, as well as on the inflationary adjustments to excise tax rates on both gas and diesel.

If approved by the state legislature, the payments could start as soon as July.

 

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