The White House is studying a range of potential responses to rising gas prices as top Democrats in Congress push the administration to embrace a new tax on large corporate profits ahead of the 2022 midterm elections.
The ideas they have discussed include a major release of the nation’s oil reserves, loans and other incentives to energy producers to encourage production, and a federal gas tax holiday, according to two people with knowledge of the conversations, who spoke on the condition of anonymity to describe internal discussions.
Biden aides have also discussed ideas that they are less likely to advance. These ideas include rebate checks for motorists and using decommissioned buses in major cities to promote public transit and reduce gas demand, the people said.
Additionally, White House officials have had preliminary conversations about a potential “windfall tax” on the profits of large oil and gas producers, the people said, although it is unclear if they will embrace such a measure. On Friday, Sen. Bernie Sanders (I-Vt.) announced a plan to tax at 95 percent the profits of all firms with more than $500 million in revenue above what those firms typically earn in profits. Democratic Sens. Sheldon Whitehouse (D-R.I.) and Sherrod Brown (D-Ohio) have also pushed a tax on the profits of large oil and gas producers.
“The time right now is to tell the 1 percent and the CEOs of this country that this economy can’t just do well for them,” Sanders said in an interview. “They cannot continue to raise prices.”
The push from Democratic members of Congress reflects the vexing position facing the administration as it weighs how to encourage private industry to lower prices for consumers and arrest price increases across the economy more broadly.
President Biden has at times expressed a desire to work with private industry to promote supply and lower prices, but has simultaneously publicly cajoled producers over high profits and urged them to keep prices low.
A White House spokesman said in a statement that Biden is very concerned about the impact of high gas prices on consumers and is working with allies in Congress to review different potential solutions.
The pressure on Biden is likely to intensify as hostilities continue to mount over Russia, the world’s third-largest oil supplier. Gas prices on Thursday were at $4.24 per barrel, according to AAA. That is down slightly from last week but up nearly 20 percent from last month.
Adam Ozimek, chief economist at the Economic Innovation Group, said taxes on oil and gas firms will make them less likely to expand. Boosting the supply of energy, he said, is necessary to ultimately reduce prices.
“I don’t see any way this makes the situation better, and only ways it can make the situation worse,” Ozimek said. “You would think drillers will be more hesitant to invest if they think they’ll be taxed for doing so. … We want to encourage investment, not discourage it.”
But other economists say there’s potential value in the measure. Sanders, for instance, estimates his tax could raise as much as $400 billion in new revenue that could be directly given back to consumers.
“This is the one tax that may be salient enough for corporations to change their pricing behavior,” said Josh Bivens, an economist at the Economic Policy Institute, a left-leaning think tank. “If you had excess profits tax, firms would say, ‘I could raise prices a ton, but those profits will be taxed away, so I’ll just keep prices low.’ ”