In recent months, the rising rate of inflation has taken a significant toll on Americans. Paychecks aren’t stretching nearly as far as they should be due to inflation, which is one of the most significant effects of this issue. This is due to the impact of inflation on the prices of everything from groceries to a gallon of gasoline, which reached an all-time high of $4.33 per gallon in March.
This alone has put a significant strain on the funds in Americans’ bank accounts. And while last year’s increased Child Tax Credit payments helped millions of low- to moderate-income households make ends meet, there are no more monthly tax credit payments in the near future. The enhanced benefits were allowed to expire in 2021 because lawmakers were unable to agree on an extension.
The good news is that additional financial assistance may be forthcoming in the near future. The Gas Rebate Act and the Stop Gas Price Gouging Tax and Rebate Act, both of which include direct payments to American citizens, were recently introduced by members of Congress in an effort to alleviate the burden of high gasoline prices. Here is an explanation of each bill, its potential financial impact, and who would be eligible for payments should these bills become law.
How to understand the Gas Rebate Act
This is it: Congressmen Mike Thompson, John Larson, and Lauren Underwood introduced the Gas Rebate Act earlier this year as a solution to the high gas prices Americans face at the pump. If enacted, the Act would help Americans afford the high gas prices at the pump by providing a monthly rebate on energy costs.
Similar to the direct payments issued as part of the enhanced Child Tax Credit, eligible Americans would receive a monthly energy rebate.
The potential value of this monthly energy rebate is $100 per qualifying adult. Households that qualify could receive an additional $100 per month for each dependent. The monthly direct payments from this Act would continue through 2022, provided that the national average price of a gallon of gasoline remains above $4.
Who would be eligible: As previously stated, the price requirement included in this proposal would restrict payments to only months in which average gas prices exceed $4 per gallon. If prices fall below $4 per gallon on average for the month, no payments will be made for that month.
In addition to the price requirement, eligibility would also be contingent on meeting a minimum income threshold. To qualify for this proposed gas rebate, a single taxpayer would need to earn less than $75,000 per year. If you are married and file jointly, you must earn less than $150,000 annually to receive the maximum monthly payment.
If enacted, you may be eligible for some direct payment benefits if your annual income is slightly higher than the maximum of $75,000. Nonetheless, payments would cease entirely at $80,000 for single filers and $160,000 for married filers filing jointly.
What you should know about the Stop Gas Price Hikes and Refund Act
This is it: Congressman Peter DeFazio introduced the Stop Gas Price Gouging Tax and Rebate Act in March as a way to help Americans afford the price of gasoline. This Act aims to impose a windfall profit tax on excessive corporate profits and return the revenue to American consumers in the form of a tax rebate.
This Act is motivated by the belief that a number of major oil companies are profiting from the impact of the Russian invasion of Ukraine on the market, which has resulted in higher gas prices. In turn, the bill proposes that the major gas companies be taxed at a significantly higher rate in 2022 if their profits exceed 110% of the average profits of the previous year.
The major oil companies would be taxed at a rate of 50 percent when their profits reach the tipping point outlined in the bill. These funds, which would be collected by the IRS, would be redistributed to citizens the following year in the form of a tax rebate.
It is impossible to estimate how much Americans would receive from the tax rate increase on large oil companies. The tax rebates would be directly proportional to the amount of revenue collected from the higher tax, and profits would have to exceed 110% for the higher tax rate to be implemented.
Despite the uncertainty surrounding the potential tax rebate amount, it is clear that Americans would not have to wait until tax season to receive the money. The revenue generated by the windfall profit tax would be returned to the American people in the form of a monthly, advanced, refundable tax credit, similar to the monthly Child Tax Credit payments issued in 2021.
As with the majority of other stimulus programs, eligibility for this tax rebate would be based on income. According to the bill, eligibility requirements for the tax rebate would be identical to those for the American Recovery and Reinvestment Act’s economic impact payments.
Where do these two bills go from here?
Currently, the future of both bills is uncertain. Both proposals are in their infancy, and both are likely to encounter significant obstacles as they navigate the proper channels. Whether or not they can overcome these obstacles to be signed into law is uncertain.