New oil tax bill: political windfall for President?
Buoyed by fresh electoral triumphs, President Carter now anticipates victory of a different sort: a windfall profits tax designed to blunt the impact of higher oil prices on millions of Americans.
By mid-March Mr. Carter hopes to sign into law a bill siphoning $227.7 billion in "unearned" profits from US oil firms and channeling $56.8 billion of it to poor families to help them pay heating bills.
Politically, the President urgently needs the bill because it is his decision to decontrol the price of domestic oil that is pouring millions of additional dollars into oil firm coffers.
Congressional conferees having approved the windfall measure, final action by the full House and Senate is expected shortly.
Meanwhile, US Department of Energy officials project a $1.50-a-gallon price for gasoline by the end of this year, partly because of Mr. Carter's progressive decontrol of domestic oil.
On a broader front, the President says his existing economic policies "suit me fine," but has set his top aides searching for ways to get a grip on runaway inflation.
Ruling out mandatory wage and price ontrols, Mr. Carter told a group of magazine editors that a request by him to Congress for authority to impose such controls would ignite fresh inflationary fires.
While Congress debated the issue, the President said, business and labor would rush to get higher prices and wages in place before any controls deadline.
This, concedes a key administration economic official, "leaves the President with few options" in the fight against inflation, now running at about an 18 percent annual rate.
What options the White House does have would be highly unpalatable to low-income Americans, as the following list of possibilities -- under review by Mr. Carter's economic aides -- shows:
Cutting the current fiscal 1980 budget to reduce its estimated $39 billion deficit and slicing the projected $15.8 billion shortfall of the fiscal 1981 budget.
Such budget cuts would have to come in nondefense spending, since both the President and Congress intend to boost military outlays.
One way to cut government spending would be to change the law that links increases in benefit payments -- including social security, food stamps, school lunch programs, and supplementary income payments for the aged and poor -- to the Consumer Price Index.
These programs and some others are due to cost roughly 13 percent more this year, because that is the rate at which the Consumer Price Index rose in 1979. Millions of the most vulnerable Americans would be hard-hit by weakening, or removing, this cost-of-living provision of their benefits.
Limiting government spending to a fixed percentage of the nation's gross national product (total output of goods and services). This likely would require cuts in the fiscal 1981 budget.
Imposing a large retail tax on gasoline to discourage oil consumption, or an equivalent fee on each barrel of imported oil.
Urging the Federal Reserve Board -- which acts independently of Congress and the White House -- to tighten credit another notch, forcing already high interest rates even higher.
As for the windfall tax, the House-Senate compromise would allocate $136.4 billion to general income tax reductions, though any specific cuts would have to be legislated by Congress.
Current White House and congressional thinking is against early tax cuts, lest more money be pumped into the economy, stimulating inflation.
Other allocations include the $56.8 billion to low- income Americans and $34. 1 billion for mass transit, rehabilitation of railroads, and development of unconventional sources of energy.
Though these sums are huge, they will be spread out over 11 years, from March 1, 1980, to the end of 1990. If oil prices rise faster than now foreseen, the total tax paid by oil companies also will grow.
Under the bill's formula, some $221 billion of additional profits would be left to US oil companies, subject to ordinary income and corporate taxes.