GOP tax rebate plan called costly, ineffective

Martin Wolk Chief economics correspondent • Profile • E-mail

For a nation "addicted to oil," as President Bush put it, Senate Republicans have a proposal that can only be described as enabling: Put $100 back into the pocket of every taxpayer.

The proposal, unveiled Thursday, has been roundly criticized not only by Democrats but also by fiscal conservatives who warn it will widen the deficit while doing little to encourage energy conservation.

"It could be one of the dumbest ideas of the year," said Jerry Taylor, a senior fellow at the conservative Cato Institute. "I haven't looked at all of the ideas yet, but it's got to be right up there."

Taylor pointed out that as proposed, the rebate would go only to people who paid federal income tax last year, meaning it would be no help at all to the millions of low-income Americans who pay no income taxes but arguably suffer the most in times of rising fuel prices. About 100 million taxpayers would qualify for the rebate, which would be limited to filers with incomes under $150,000 for couples or about $100,000 for singles. It would cost more than $10 billion.

Not only that, but the same tax rebate would go to the Wall Street trader who takes the subway to work every day and to the rural Wisconsin farmer who uses thousands of gallons of fuel in his business, Taylor noted.

"It's not really a compensation for higher gas prices," Taylor said. "It's simply a please-vote-for-me-in-November payment."

John Berthoud, president of the National Taxpayers Union, which like Cato generally supports lower taxes and a more limited government, described the GOP proposal as "almost 100 percent political pandering."

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David Sandalow, environment scholar with the generally left-of-center Brookings Institution, said the plan "would pass the bill for higher gas prices onto our children."

"We are running a huge deficit today, and sending out checks from the government to taxpayers and increasing the debt to do it doesn’t solve the basic problem – it merely avoids dealing with it." he said.

In addition to the "gas tax holiday rebate," the Senate plan would eliminate certain tax incentives that benefit oil companies, authorize more research into alternative energy and open part of the Alaska National Wildlife Refuge to oil drilling.

“This is a short-term important Band-Aid to a wound that is bleeding and it is beginning to hemorrhage,” Senate Majority Leader Bill Frist said in promoting the "Gas Price Price Relief and Rebate Act." Political analysts said the proposal was unlikely to be passed into law, although Senate leaders are hoping to bring it to a vote next week.

Democrats said the plan was doomed to failure because Republicans attached the rebate plan to opening up the sensitive Alaskan waters to drilling, an idea that repeatedly has failed to pass Congress in recent years.

But they were careful not to come out against the tax rebate idea itself. "The $100 rebate -- no one's against that," said Sen. Charles Schumer, D-N.Y. "But what's going to happen five months from now and 10 months from now and 15 months from now, when the price stays high because they haven't touched Big Oil?"

Sen. Debbie Stabenow, D-Mich., suggested mailing out $500 checks -- the amount the average family will spend in extra energy expenses this year, she said.

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