Paying for the $100 ‘rebate checks’ — or not

May 2, 2006

Last week, Senate Majority Leader Bill Frist (R) took election-year pandering — and attempted bribery — to new depths by unveiling a plan to give most Americans a $100 “rebate check” to help pay for a couple of tanks of gas. Even by Frist’s low standards, this was just embarrassing.

Apparently, this was a common opinion, but not for the obvious reasons. Dems disparaged the idea because it’s dumb, but Republicans disapproved because Frist planned to pay for the rebates through a series of tax measures imposed on the oil industry. Under pressure, Frist backed down yesterday — not from the rebate checks, but from the funding source.

Senate Republicans on Monday hurriedly abandoned a broad tax proposal opposed by the oil industry and business leaders, another sign of their struggle to come up with an acceptable political and legislative answer to high gasoline prices.

Senator Bill Frist of Tennessee, the majority leader, said he had decided to jettison the provision, which would have generated billions of dollars by changing the way businesses treat inventories for tax purposes…. The retreat came after a torrent of objections from business leaders and their advocates, who typically view Republicans in Congress as allies. They said they had been blindsided by the inclusion of the proposal as a central element of the Republican leadership’s energy package late last week.

Frist had suggested eliminating a tax provision called “Last In, First Out” (or LIFO), which helps Big Oil cut their tax liability. The oil industry said it needed the accounting provision, so Republicans vowed to keep it in place. It’s reassuring to know that congressional Republicans will drop modest tax increases like a hot potato, no matter how big Exxon Mobil’s profits are, just as soon as those lobbyists start working the phones.

But according to news accounts, the rebate checks are still on the table. How would Frist pay for it? It’s a funny story….

The Wall Street Journal reported:

Amy Call, a spokeswoman for Mr. Frist, said the $100 rebates would cost $15 billion. Now senators will “look for other options” to make up the lost revenue, Ms. Call said, adding that they also might simply move the bill without any additions, meaning the increased spending will add to the deficit.

It’s an amusing series of events. Frist came up with a bad idea (rebate checks) to be paid for by a good idea (higher taxes from the oil industry). Under pressure, Frist dropped the good idea but kept the bad one. Asked how he’d pay for the bad idea, Frist responded the same way all Republicans in DC do to the question: he’d put it on the national charge card and let future generations worry about it.

Perfect. Frist, for several days, toyed with the nation of a fiscally responsible approach to a bad public policy. When push came to shove, it’s the fiscal responsibility that had to go.

I suggest that every person who gets a check send the hundred bucks to Howard Dean at the DNC, so Frist would effectively be funding his worst enemy with public money. What a slap in the face that would be!

Of course, you could send it to MoveOn.org or the progressive candidate of your choice and that would be fine. But as a purely symbolic gesture sending it to Dean would be by far the most ironic, as well as helping expand the nationwide organization he has been putting together over the last few years, which is a super-good thing in my humble opinion.

What do you think, guys? We’ll never miss a hundred bucks we never had in the first place. And it will do a lot more lasting good than a couple free tanks of overpriced gasoline.

  • “If prices are rising, each of the accounting methods produce the following results:

    FIFO gives us a better indication of the value of ending inventory (on the balance sheet), but it also increases net income because inventory that might be several years old is used to value the cost of goods sold. Increasing net income sounds good, but remember that it also has the potential to increase the amount of taxes that a company must pay.

    LIFO isn’t a good indicator of ending inventory value because the left over inventory might be extremely old and, perhaps, obsolete. This results in a valuation that is much lower than today’s prices. LIFO results in lower net income because cost of goods sold is higher. ” http://www.investopedia.com/articles/02/060502.asp

    So in a climate of rising prices oil companies can lower their tax liability by switching to LIFO accounting.

    And knowing this, we should take Republikans seriously regarding gas prices? Yeah, right.

  • Can you imagine what $15 billion might do if
    invested in real energy solutions, as opposed
    to pandering to the people, probably 90% of
    whom realize how ridiculous this proposal is?

    They tried this in Idaho a few months ago – a
    $50 rebate to all tax payers to offset the
    high price of heating. The people resoundingly
    denounced it. Fix the problem, they said, rich,
    middle class and poor alike.

    How bad can our government be that they
    could even consider this? How bad can
    it be that they will do anything, anything at
    all to avoid facing the real problems that
    confont our nation and the world? How can
    we be granting gigantic tax breaks to the
    rich and Big Oil instead of investing that
    money in a sound energy program? How?
    And why isn’t anyone raising hell about it?

    It is just disgusting beyond words.

  • The $100 rebate check had to be the DUMBEST idea I have heard.

    The costs involved in cutting and processing the checks would be enormous. The compliance costs, if tax payers have to PROVE they own a car, would also suck up most of the value of the check. In the end, the tax payer would get maybe $50 worth of value out of it (about one to two tanks of gas).

    Comparibly, if we just turned off the Federal gasoline sales tax for a month or two, there would be no administrative or compliance costs, and the value would go directly to the gasoline consumer. Better yet in Republicanite terms, since they travel further (being more rural and suburban), more of the money would go into the pockets of the red-staters.

    Of course, cutting the $ 0.184 a gallon out at the pump would wake America up to how LITTLE we actually spend on taxes for gas. Not only that, but the Oil companies would get to raise prices by about a third of that (pure guess) because of the sudden rise in demand due to lower gas prices. Thus the consumer might only see $0.12 decrease in the gas price.

    Frist a dumb f*ck is!

  • This is a perfect example of Republican rule. They don’t have any idea how to deal with the problem so they resort to payoffs. It reminds you of earmarks. How can a party govern if it really doesn’t believe in government. Its all just payola.

  • I bet the $100 will come in the form of an Exxon or Shell credit card so that your only option is to give it back to the oil companies.

  • Interesting slant on it, Hey. We could still send the cards to Dean so his state and local operatives would have free gas to do their campaign work with. One way or another, we’ll find a way to rub the Republicans’ faces in it, assuming they make it happen at all.

  • An interviewee on NPR’s Talk of the Nation today said the rebate plan isn’t dead and Frist/RepubCo is going to tie it to drilling in ANWR to buy public support for that bad idea. Or something like that. It didn’t make any sense.

    Curmudgeon, that is a great idea. I’ll do it if the checks ever happen. But I think that concept would push Frist to send out pre-printed checks that are good only at Exxon stations.

  • Frist is a FREAKIN’ idiot! I swear to God he better not be president one day………

    OK so we all get tht $100 dollar check and the total cost gets added to the deficit. So future generations can pay for that….. he obviously doesn’t understand the concept of interest….. considering that he is and others in the GOP are such slaves to the credit card industry and likely all have at least one credit card, one would think it would be a concept that they might understand.

  • Something else to figure into the equation is what an additional, immediate increase in the demand for gasoline in the US is going to do to the supply figures. This is supply-side economics in its ultimate, worst-case scenario.

    First, there have already been “spot shortages” due to the seasonal blend changeovers, and the fact that not all the refinery capacity damaged by the ’05 hurricane season is up to 100% yet. Global speculation is driven by market blips, that can be anything from terrorist activity, to foreign-power input…and to consumption flip-flops that are outside of normal parameters. What happens when there’s suddenly an additional, FIFTEEN BILLION DOLLAR DEMAND on the available supply of gasoline?

    I see the oil companies right now dreaming of another record-breaking year as regards profits. I see “no gas” signs popping up all over the place, right in the middle of the summer driving season. I see a “$” sign…and the number “four….”

    So—why can’t Washington just play the Bolivia/Venezuela game—and nationalize its natural resources? Tell the oil companies to shift from owner to operator—or get outta Dodge….

  • The one thing we must remember about the profits of the Oil Companies is that every barrel of oil they pump out of American land or waters costs just the same to produce as it did last year, but they get to price it to the consumers as if they bought it off an oil tanker from Saudi Arabia.

    That is where their grotesque profits are coming from. And don’t forget that Exxon/Mobile spent some of that grotesque profit buying back stock in their company, rather than reporting it as net profit or investing it in additional oil production or refining capacity.

    So when you see that Oil company add with the dollar broken up in to pieces and they say 55% of the cost of a gallon of gas is for crude oil, ask them to break it down and tell you how much is for the difference between a domestically made barrel in 2000 and one in 2006.

  • Actually, I am moderately impressed that he actually had a decent idea to pay for it in the first place. Now, how about cutting out LIFO without sending out the checks? If that miniscule change makes up $15 billion, see how easy it is to BALANCE THE F*&KING BUDGET?!?

  • “if tax payers have to PROVE they own a car…”

    Nope. Read the NYT article again. No such test was gonna be required. Which made it even more obviously a bribe, as I said over here.

    LIFO isn’t solely the province of oil companies, either. The manufacturing guys didn’t think much of the idea, nor did the big box retailers.

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