(Bloomberg) -- Senator Sheldon Whitehouse is pitching a steep new tax on oil companies, such as Chevron Corp. and Shell Plc, as part of a broader plan to mitigate the impact of inflation on middle-income families.
Whitehouse, a Rhode Island Democrat, said taxing the corporate profits that are the result of high oil prices would be preferable to a suspension of the 18-cent-a-gallon federal levy on gasoline, an idea that some of his Senate colleagues have floated.
“There’s absolutely no guarantee that if we pulled back the gas tax, big oil just wouldn’t jack its prices another 18 cents,” Whitehouse said in a call with reporters on Thursday. “The gas tax doesn’t distinguish between a billionaire’s Escalade and a school teacher’s Taurus.
Whitehouse said his plan -- putting put a 50% tax on the difference between the price of a barrel of oil today and the average price from 2015 to 2019 -- would subject oil producers and importers, rather than consumers to the tax. He said he expects large oil companies like Chevron, Shell, BP Plc, EOG Resources Inc., Occidental Petroleum Corp. and Exxon Mobil Corp. would be forced to pay the tax if his plan were to become law.
The estimated $45 billion in revenues from the new levy would then be rebated to low and middle income households. The payments would phase out for individuals earning more than $75,000 or couples earning $150,000. Whitehouse estimates that single filers would receive approximately $240 a year, and joint filers would get about $360.
The plan, which also has the backing of Senators Bernie Sanders, Elizabeth Warren, Michael Bennet and Bob Casey, is introduced as Democrats are looking for a way to cobble together an economic policy plan while still they have majorities in both the House and Senate.
Inflation Is Rising Faster Than Pay for Many American Workers
Democrats’ plans to pass a roughly $2 trillion social spending and climate package financed by tax increases were stalled last year after Senator Joe Manchin said he couldn’t support the bill. This month Manchin, a West Virginia Democrat, has said he is open to more narrow legislation that also includes elements to tame inflation and reduce the federal deficit.
A spokeswoman for Manchin did not immediately respond to a request to comment on the oil profits tax.
The consumer price index jumped 7.9% from a year earlier following a 7.5% annual gain in January, the Labor Department reported Thursday. That jump included a 40-year high for gasoline prices. Gas prices are poised to jump even further as some countries ban Russian oil because of that country’s invasion of Ukraine.
Democrats are far from unified in what ideas they want to include in the next package, which could take months to negotiate. Any package needs to the support from all 50 Democrats in the evenly divided U.S. Senate.
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