No one much has anything good to say about the Republican proposal for a $100 rebate to all taxpayers to offset the impact of rising gasoline prices. There are some potential traps, but from what I’ve seen so far, my biggest objection is that the Democrats didn’t propose it first.
Obviously, a grant of this kind will have no impact on behavior or on markets for oil and gasoline (there’s not even a requirement to show that you spent the $100, from what I can see), but that’s a good thing. The increase in prices is sending a signal that oil is scarce and the rebate does nothing to change this, while partly offsetting the income effects of higher prices.
In distributional terms, this is the first time since Bush was elected (in fact, the first time I can recall) that we’ve had a tax cut proposal from the Republicans that wasn’t overwhelmingly skewed towards the top 1 per cent of income earners. In fact, a uniform cash payment to everyone (a ‘demogrant’ in the jargon of tax-welfare wonks) is a policy usually found on the left of politics.
Of course there has to be a catch somewhere. One point I’m not clear on is whether “taxpayers” effectively means everyone (since everyone pays taxes) or whether it’s only personal income taxpayers, and how many people would miss out on the latter definition. The other is that the proposal is tied in some way to drilling in the Arctic National Wildlife Refuge: I don’t understand the processes enough to know whether this package can be unbundled. Finally, it’s another $10 billion on the deficit, and that’s not a good thing. But at this point in the process, it’s just rounding error. However, the deficit problem is resolved, $10 billion here or there isn’t going to make a lot of difference.
{ 36 comments }
greensmile 04.29.06 at 9:15 am
You are trolling, sir.
“…democrats didn’t propose it first.”
nonsense! They did well to keep quiet. How stupid do you suppose the democrats in congress think their constituents are? A $100 bribe so voters won’t further lower their already resentful approval ratings of this congress? Its a “republican dominated congress” so let the bums own the crappy reputation. Besides, who is paying for this handout and how close to 80$ worth of accounting per tax payer will be spent to pull it off?
OK, I’ve calmed down enough to read the next two paragraphs…at least you ask the questions. Aren’t the answers obviously bad news?
Its an idiotic idea, an insulting idea. And any congressman or commenter that seems jealous of not proposing it should be exposed. Its also a “big government” idea so why are the republicans even associated with it? Sheer desperation! Simpletons manipulating other simpleton’s sympathies is already proven to be a damaging way to run a nation. [my turn to troll]
–and I am not even a Democrat!
Keith 04.29.06 at 9:32 am
It’s a bribe, pure and simple. The GOP is saying, “here kid, here’s a hundred bucks for ‘gas.’ Remember Uncle George in Novemeber.”
abb1 04.29.06 at 9:50 am
Do the expats get $100 too? Hey, Uncle, I’m paying $6/gal here, I should get $200, dammit.
stuart 04.29.06 at 9:56 am
According to the way I think of finance and economics this isnt even a bribe. It would be an enforced loan, seeing as the same people (largely) would have to pay it off (with interest) that are getting the benefit.
Of course it is redistributive, in that those that pay more taxes will cover more of the cost in the long term than the poor. So of course the question has to be asked: Has the republican party been invaded by communists? Of course its really just rank opportunism, after all the current administration are willing to blow through $10 billion at the drop of a hat because they won’t be footing the bill.
P O'Neill 04.29.06 at 10:07 am
Based on the pattern of Bush’s tax-cuts from a few years ago, the cheques would have come with a messsage like “Freedom Downpayment” printed on the front.
Maynard Handley 04.29.06 at 10:16 am
If a $100 rebate is good, why isn’t a $1000 rebate even better?
Dan Kervick 04.29.06 at 10:22 am
According to the way I think of finance and economics this isnt even a bribe. It would be an enforced loan, seeing as the same people (largely) would have to pay it off (with interest) that are getting the benefit.
Of course it is redistributive, in that those that pay more taxes will cover more of the cost in the long term than the poor.
But it won’t be paid for by increased revenues collected from the people receiving the rebates. It will be paid for by further cuts in spending. The pain from the cuts will fall disproportionately at the bottom of the income scale, and the benefits will accrue disproportionately to the top.
Isn’t this just another installment of the same old tax rebate scheme with which the Bush administration began their term in office? Republicans have a long-term strategy to cut spending by creating a “fiscal train wreck”. Rather than take on the spending programs frontally, which is politically difficult, they peremptorily ship revenues back to taxpayers and drive up the deficit. Future Congresses will probably be forced eventually to do something about the deficits, and Republicans are banking on the assumption that their successors won’t have the nerve to raise taxes.
Lots of Democrats seem more than willing to play their assigned roles in this scheme, and are already trumpeting the new Democratic identity as the party of fiscal responsibility, willing to make the “tough choices” avoided by the fiscally irresponsible Republicans. Of course these tough choices will all be choices of spending cuts, and will not involve increasing revenues. This is called the “new progressive model”.
paul 04.29.06 at 10:27 am
I don’t see how taking $100 x some to-be-determined number of consumers out of the treasury and giving it to the oil companies (with short stay in the wallets of those consumers) is useful.
Jane Galt 04.29.06 at 11:08 am
Almost everyone in the US pays *some* tax, even if that number is trivial. The only people who might lose out are those who are eligible for the EITC-but since that’s done as a tax credit, even those people might count as taxpayers.
But even for someone who is on the EITC, $100 is pretty trivial in terms of materially improving their lives. I don’t think this tax cut matters much one way or another–it’s also trivial from a fiscal perspective–but it’s so obviously a pandering vote-getting move that I object to it merely on aesthetic grounds.
Of course, if they raised the gas tax at the same time, and then offered a progressive income tax rebate to make it revenue neutral, I’d bite, even if they phrased it in nationalistic “take money out of OPEC’s pocket” terms . . .
Brett Bellmore 04.29.06 at 11:09 am
It pretty much IS the case, without these kinds of blatent redistribution schemes, that tax cuts are going to be skewed towards the wealthy.
After all, they’re paying most of the taxes. And you’ve got to PAY taxes, to have them cut.
This scheme is truly pathetic, and underscores just how far from being genuinely “conservative” this administration is. Which is not to say that they’re liberal, they’re just devoid of ANY principles.
Adam Kotsko 04.29.06 at 11:11 am
I’m going to invest my rebate in a mutual fund.
Wait! No, actually I’m not going to get one, because I only paid payroll taxes. That’s what happened to me on the $300 thing, too. I just can’t seem to break into the damn “middle class,” no matter how hard I try!
Winston Smith 04.29.06 at 11:33 am
Uh, I’m fairly ignorant of economics, but I suppose this $100 rebate struck me as about the worst kind of response I could think of.
High gas prices are actually good in at least this respect: they work to decrease demand and make the apparent price of gas closer to its real price (including, e.g., the cost of military interventions to keep it artificially cheap). This rebate works against this correction.
And this response uses government money to cover up and correct for what may to some extent be price gouging by big oil. So we’re using our own money to give cover to the guys who may very well be screwing us.
Because of my ignorance of this subject, however, please to rephrase the above as questions rather than assertions.
Brett Bellmore 04.29.06 at 11:51 am
No, not really, since the money can be spent on anything at all, it really has no gas specific effect. In fact, if you levied increased gas taxes, and handed the money back to people, it would be a somewhat revenue neutral way of diverting people’s purchasing power away from gasoline.
But, you know, this is NOT “gouging”, there are very real reasons the price is trending up. And, sure, the gas companies are making a decent profit margin now. (Not spectacular, just decent.) But their average rate of return over the long term hasn’t been anything unusual. They DO have bad years to ballance the good, you know, and unless you’re planning on subsidizing them in the bad years, it seems inappropriate to take their profits away in the good ones.
anciano 04.29.06 at 11:51 am
We must help ordinary people penetrate the fog of advertising slogans that cloaks everything in the modern world. Geertz’s book, Negara The Theater State described the function of the government of Bali as putting on periodic spectacles to reassure the people that all would be well and that there was meaning in the world. A fatalist might say that we will have intercontinental nuclear war, severe climate change and total pollution of the oceans within 25 years no matter what political action we take, so why not lean back and enjoy it?
We have a disastrous confluence between a malignant militaristic faction of the Republican party which has skillfully manipulated religious and patriotic symbols while devoting progressively more of the budget to foolhardy military adventures and is committed to the idea that the multinational oil companies will solve our petroleum problems if we push Islamic militants out of their way, and a do-nothing Congress which has abdicated all responsibility for anything other than staying in office.
Rebates of $100 or $1000 are symbolic gestures. They will do nothing to reduce US gasoline consumption. A gasoline tax would reduce consumption but the do-nothing Congress is more likely to endorse a Mars mission than a federal gasoline tax. Statewide actions such as extra taxes on all drive-through retail operations (banks, pharmacies, fast food, Starbucks, etc) extra taxes to enter all national monuments for off road actions (conspicuous consumption of gasoline) and for NASCAR and all auto races (same reasons) would help. Think of the wasted gasoline and added pollution that drive throughs produce, all to save a few minutes. My point is that saving gasoline and reducing carbon emissions is more important than saving time. This could be done in some progressive states, but most governors wouldn’t dare to say – time is less critical than saving gasoline and reducing emissions.
When you say that the rebates (Sen. Stabenow proposes a $500 rebate- is there a difference between Democrats and Republicans) represent redistribution you swallow the theater and advertising. You are saying party today, trust in the government, don’t worry about deficit spending. I say that’s crazy. Teaching our children to see through the fog of advertising complex. Refusing bribes is a first step. There is meaning in the world; that sound bites & video clips control elections and that elections alone are only a shadow of democracy.
abb1 04.29.06 at 12:15 pm
$100 is ideed a symbolic gesture, but $1000 is a decent bicycle.
goatchowder 04.29.06 at 12:54 pm
Umm, has anyone done the math on this?
$100 is about 33 gallons of gas, or, two tankfulls. WTF?
How the hell is this supposed to help? Please.
jet 04.29.06 at 12:57 pm
Alan Colmes had a brilliant idea this morning. Instead of some trivial and transparent pandering joke of a $100 taxcut, why don’t we allow energy companies to not pay taxes on any profits that they then turn around and invest in alternative fuel/energy research/infrastructure.
Since everyone agrees that renewable energy is the only future we have, why not create a trail of incentives to move our energy companies in that direction? State incentives led the largest energy company in my state to stop leasing wind farms from 3rd parties and to start buying them outright.
albert 04.29.06 at 1:11 pm
I suspect companies could already invest more heavily in R&D and thus lower their profit rate internally. How would that be different from Colmes’ proposal?
abb1 04.29.06 at 1:32 pm
Nah, this won’t work: if they invest in alternative fuel/energy, then they would have to spend on sabotaging alternative fuel/energy even more than they do now. Then the oil price will go even higher.
jet 04.29.06 at 1:40 pm
Albert,
I’m trusting Colmes to have some idea of what he was talking about. But I would think that if a business makes money from widgets and it wants to take the money it made from widgets and start producing wodgets, it wouldn’t be able to write off that money as a business expense. My understanding is you only get to write it off if the investing is in your business (ie widgets) and not some other business (ie wodgets).
But maybe you are right and coal power and wind power are just part of the same business.
Abb1, could you cite some instances of sabotaging alternative fuels by Citgo, Exxon et al? And no, Ted Kennydy doesn’t count as an energy company (all jokes aside), but he is sabotaging wind energy in a big way. Perhaps that is what you were referring to?
abb1 04.29.06 at 1:50 pm
One doesn’t need to know instances where simple logic would suffice.
lemuel pitkin 04.29.06 at 1:57 pm
Democrats did propose it first, sort of. Back in the 70s, the centerpiece of Carter’s “New Energy Policy” was an increased gas tax offset by a demogrant. revenue neutral, but encouraging less use of gas. Good policy then, good policy now.
And to Maynard Handley’s question, a $1,000 would be better. A guaranteed minimum income should be a central plan of Dem economic policy.
Of course it won’t be, as long as we’re taking our cues from folks like Brad deLong and Robert Rubin. But to a hypothetical Democratic party whose prime consituency was working people rather than bond owners, this sort of thing would look like a good first step.
lemuel pitkin 04.29.06 at 2:15 pm
“plan” should be plank. And I should have clarified that $10,000 would be better than $1,000, and every eyar would be betetr than just once. But it’s a first step…
Adam Kotsko 04.29.06 at 3:34 pm
If people didn’t have to work their asses off all the time, then they could afford to keep up with politics.
KCinDC 04.29.06 at 4:19 pm
Why on earth would you do that? Next you’ll be telling us you feel the same way about Hannity.
Dan Kervick 04.29.06 at 5:24 pm
Alan Colmes had a brilliant idea this morning. Instead of some trivial and transparent pandering joke of a $100 taxcut, why don’t we allow energy companies to not pay taxes on any profits that they then turn around and invest in alternative fuel/energy research/infrastructure.
Good idea. But even better: Why don’t we just pass some new levies, and take some of these windfall profits from the oil companies so we can invest them ourselves on some major public projects of our own choosing. I’m sick of private-public partenerships and corporate welfare. How about some good old-fashioned public works and public investment?
Andrew 04.29.06 at 6:34 pm
well if it’s $10 billion and $100, then it’s 100 million payouts, and that isn’t even the number of personal income tax payments.
John Quiggin 04.29.06 at 7:50 pm
I think it’s one payment per household, but I haven’t checked carefully on this.
raj 04.30.06 at 8:57 am
From the post
It may very well to be suspicious. These types of things oftentimes end up being little more than a christmas tree onto which numerous tax breaks for the well-to-do are hung.
'As you know' Bob 04.30.06 at 12:08 pm
Goatchowder (#16), you’re having a failure of imagination:
Umm, has anyone done the math on this?
$100 is about 33 gallons of gas, or, two tankfulls. WTF?
How the hell is this supposed to help? Please.
First of all, you’re thinking in terms of today’s prices. The best estimates are that gas is going to hit $4/gallon this summer.
And second of all, keep in mind that we’re talking about Americans here, most of whom own gas tanks MUCH larger than your 17-gallon estimate.
There’s a Chevy Suburban that has a tank. Granted, that’s on the large side, but there are plenty of SUVs with 26- and 28 gallon tanks. And, of course, the Hummer H1 holds 52 gallons of diesel.
So by the time this hundred bucks arrived, it will be less than a SINGLE fill-up for many SUV owners.
'As you know' Bob 04.30.06 at 12:09 pm
That should read:
“There’s a Chevy Suburban that has a 31-gallon tank. ”
My tagging skills are weak.
LogicGuru 04.30.06 at 12:49 pm
This reminds me of the scene in the movie where Evita soon-to-be Peron quelled an urban riot by appearing in the street shaking a tin can, collecting coins for her “shirtless ones.” Or Walmart, distributing food to Katrina victims and promising employees flooded out in New Orleans comparable shit jobs elsewhere in the country.
These little charities are very cost-effective. Perpetrators can distance themselves from states of affairs for which they’re responsible by pretending they’re the solution rather than the problem, and win hearts and minds by small, visible charities. This is the way tin-pot dictators in corrupt developing countries operate. First, trash the country, line your pockets, finance your cronies and impoverish the peasants. Then, dispense little goodies to grateful, impoverished peasants.
Will it work? Of course. People scarcely notice good roads, good schools, social services and social safety nets. When they have these goods they take them for granted and rarely credit the government for providing them. But they notice little charities and tax rebates however trivial, and are pathetically grateful.
jet 04.30.06 at 10:53 pm
Wal-mart is comparable to a tin-pot dictator trashing the country? That’s crazy talk.
jet 04.30.06 at 11:02 pm
‘As you know’ Bob,
Aren’t SUV’s luxury items that 90% of the world could never dream of affording? I’ll shed no tears over someone becoming inable to afford their 5 ton toy.
logicguru (clever name), you should also note that the reason gas prices are so high, is that same government which provides those incredible services you dream about has for 30 years had an incredibley incompetent energy policy that was only feasible do to the vastly expanding supply of oil. Now that oil supplies aren’t growing so fast, the idiot gasoline regulations, high taxes ($.45/gallon), and restrictions on new production facilities has led to sharp spikes in gas prices.
abb1 05.01.06 at 3:25 am
How could gas tax – that is a constant – lead to to sharp spikes in gas prices? It can’t.
In fact it’s the opposite: the gas taxes smooth spikes. Since I left the US, the gas price there doubled, while in Europe it only grew about 30% or so. That’s because gas taxes here are much higher, actual cost of gas is only a relatively small percentage of what you pay at a pump.
Peter 05.01.06 at 7:57 am
Arco ended up purchasing every solar panel manufacturing company in the US and letting them wither. They finally sold their solar panel division to BP. They made no innovations, nor improvements in the technology, and the panels available are still 1970s technology.
Stifling and smothering technology, and preventing it from developing counts as sabotage in my book. Buying up all the suppliers to do so, also counts as sabotage. Take a look at the history of the solar panel industry in the US if you don’t believe me.
If the oil companies didn’t end up purchasing all the solar panel suppliers, we’d have affordable solar generating rooftiles by now. Instead, what’s available in the US are clunky large arrays of solar panels.
The bribery is an attempt to get ANWR drilling pushed through. If the repubs weren’t so insistant on preventing CAFE a decade ago, we wouldn’t be in this situation. Drilling ANWR just delays the inevitable. Presuming the oil could be extracted right now, ANWR will only supply 6-24 months worth of the US’s consumption of oil (confidence levels are 95% certain of 6 months supply, tapering to 5% certain of 24 months supply).
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