White House Considers Direct Payment to Drivers to Combat US Gas Price Hike, But There's a Problem

The White House is evaluating its options for lowering Americans' high gas prices.

Direct payments to drivers is one option that has been discussed. It was one of the proposals discussed in private by White House aides. According to The Washington Post, other possible moves include a federal gas tax holiday, a third release of oil from the Strategic Petroleum Reserve, and some incentives for domestic energy companies to speed up output.

Lawmakers Propose Direct Payments To Ease Pain of Inflation

Gas prices are still high, due in part to Russia's war in Ukraine. According to AAA, the national average for a gallon of gas is $4.24. It hasn't dropped much in the recent week, but it has increased significantly when compared to last month.

Democrats in Congress are also putting up similar proposals. Rep. Ro Khanna of California and Sen. Sheldon Whitehouse of Rhode Island have filed a bill that would give Americans with weekly payments funded by a tax on successful oil firms. They predict that single filers will pay $240 per year, while couples would pay $360.

Vehicle safety checks are unlikely to get momentum in Congress. Earlier this week, Senate Republicans effectively killed the notion. They denounced it as a "gimmick" that would just add to inflationary pressures and raise the price.

California has an average gas price of $5.88 a gallon. This compares to $3.88 a year ago and $4.77 a month ago. Lawmakers have been looking for innovative ways to assist consumers cope with the agony of rising gas prices due to record-high inflation.

Per CNBC, gas tax holidays are being implemented in a number of states, including Maryland and Georgia. A bill has also been suggested to temporarily suspend the federal gas tax. Temporarily suspending such charges has been criticized by critics since they help pay road repair and may not result in significant savings for drivers.

Higher Gas Prices Cost Extra $2,000 Per Year to Americans

According to Alex Muresianu, a federal policy analyst at the Tax Foundation, the suggested rebates would be preferable to a gas tax suspension since they would not increase demand for gas.

The energy rebate payments would be $100 a month, plus $100 per eligible dependent, under the Washington Democrats' Gas Rebate Act of 2022 proposal. Single filers earning less to $75,000 would get full payments, with those earning more over $80,000 phasing out progressively. Full payments would be available to married couples filing jointly with up to $150,000 in income, with payments phasing off for those with up to $160,000 in earnings.

The Democratic plans will do little to aid Americans at the gas pump, according to Jason Modglin, president of the Texas Alliance of Energy Producers. Higher fuel prices may cost the typical American household an extra $2,000 per year, according to one Wall Street analyst.

None of the Democrats' ideas would lower the federal gas tax, which is little over 18 cents per gallon of gas sold in the US. State gas taxes boost the price per gallon as well, and some governors, notably Maryland's Republican Larry Hogan, have suggested state gas tax holidays. Last week, Hogan approved a moratorium on the state's gas tax, Fox Business reported.