Progressives Say Windfall Profits Tax a 'Better Solution' Than Biden's Gas Tax Holiday

As President Joe Biden on Wednesday prepares to urge Congress to temporarily suspend federal gasoline and diesel taxes in a bid to ease pain at the pump, progressives are calling instead for the passage of Democratic lawmakers' overwhelmingly popular bill to impose a windfall profits tax on Big Oil.

"Congress should take the president's call and answer it with the windfall profits tax legislation already proposed in the House and Senate," Jamie Henn, a spokesperson for the Stop the Oil Profiteering (STOP) campaign, wrote on social media. "A windfall tax would get more relief to more people by penalizing the Big Oil profiteering that's driving up prices."

Henn's message was echoed by former Ohio state Sen. Nina Turner, who said that "these fossil fuel companies need to give back the money they've taken out of the pockets of hardworking Americans."

During a Wednesday afternoon speech, Biden is expected to ask congressional lawmakers to lift federal taxes--18.4C/ per gallon for gas and 24.4C/ per gallon for diesel--through the end of September.

Biden is also expected to ask states to pause local fuel taxes and urge oil refineries to increase capacity.

The nationwide average for a gallon of gas is $4.96 as of Wednesday, but according to unnamed Biden administration officials who briefed CNN, prices could decrease by roughly $1 per gallon if all measures proposed by the White House are implemented.

Given widespread Republican opposition in the evenly split Senate, where the anti-democratic filibuster rule requires 60 votes to advance most legislation, Biden's call for a gas tax holiday faces long odds.

Meanwhile, several economic analysts and even members of the president's own party, including House Speaker Nancy Pelosi (D-Calif.), have questioned the effectiveness of such a policy.

According to Rep. Pramila Jayapal (D-Wash.), chair of the Congressional Progressive Caucus, and other critics, a three-month gas tax holiday would do little to help consumers while taking away an estimated $10 billion in revenue used to fund highway repair, mass transit, and environmental remediation.

"I'm shaking my head," Rep. Jared Huffman (D-Calif.) toldPolitico Wednesday. "Oil companies and gas stations will pocket most of the money and won't even send President Biden a thank you card. Consumers will get no meaningful relief from this, it will just starve our highway trust fund of revenues. I had hoped better ideas would prevail--like consumer rebates or vouchers for free public transit."

"Exactly," Henn tweeted in response to Huffman's comments, stressing that a Big Oil windfall profits tax is "better policy and better politics."

Noting that Big Oil executives "would not guarantee that repealing the federal gas tax would lower prices" when they were brought to Capitol Hill in April to testify at a congressional hearing, Greenpeace USA senior campaigner Ashley Thomson said in a statement that "the Biden administration is taking a short-sighted approach to a long-term problem. High gas prices are a symptom of the oil and gas industry's tightening vise on our society."

Since consumer demand returned following a short coronavirus-driven decline in 2020, investors have pressured oil corporations to suppress production to push prices higher. Last year, as average gas prices in the U.S. steadily climbed--reaching about $3.40 per gallon in December 2021, up from $2.10 a year before--25 of the world's biggest fossil fuel giants enjoyed a record $205 billion in profits and rewarded their shareholders with billions of dollars worth of stock buybacks and dividend bumps.

Oil and gas companies have hiked prices even further in 2022, especially following Biden's early March announcement of a U.S. ban on imports of Russian fossil fuels. Accusations of war profiteering have grown since April, when U.S. petroleum executives--projected to reap up to $126 billion in extra profits this year and already showering investors with stock buybacks--boasted about their "best quarter ever."

A report published last month by the watchdog group Accountable.US found that "in the first three months of the year, 21 oil and gas companies made over $41 billion in profits, more than doubling profits from just a year ago. This is, on average, $1.2 billion more per company than the same time last year thanks to--as the companies themselves say--high oil prices and the crisis in Ukraine."

In an effort to crack down on what progressive lawmakers have denounced as "shameless" price gouging by fossil fuel corporations, congressional Democrats led by Rep. Ro Khanna (Calif.) and Sen. Sheldon Whitehouse (R.I.) introduced the bicameral Big Oil Windfall Profits Tax in March.

According to survey data released just days after the legislation was unveiled, 80% of U.S. voters--including 73% of Republicans--support the measure, which would hit large fossil fuel companies with a per-barrel tax equal to 50% of the difference between the current price of a barrel of oil and the average price per barrel between 2015 and 2019. An estimated $45 billion in annual revenue would be redistributed to U.S. households in the form of quarterly rebates.

Dozens of progressive advocacy groups and lawmakers have been urging Pelosi and Senate Majority Leader Chuck Schumer (D-N.Y.) to support the Big Oil Windfall Profits Tax, which Sen. Elizabeth Warren (D-Mass.) has said can help Democrats avert "big losses" in November's pivotal midterms.

Khanna, who said last week that he was "encouraged" by Biden's letter criticizing oil executives for restricting supply, made the case for why a windfall profits tax--which the White House recently started talking with congressional lawmakers about--is superior to a gas tax holiday.

"The problem with repealing an 18C/ gas tax," Khanna tweeted Wednesday, "is it feeds into a far-right narrative that the problem is government, not Big Oil gouging consumers."

"Let's pass [our] windfall profits tax instead to tax huge oil profits and put money back into the pockets of Americans," he added.

However, Khanna and Whitehouse's proposal faces an uphill battle considering the GOP's desire to take advantage of voters' mounting anger at the state of the economy. Not only is it unlikely that at least 10 Senate Republicans would support advancing debate on the bill, as required due to the filibuster, but questions remain about whether corporate Democratic Sen. Joe Manchin (W.Va.) would vote for it.