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$100 Gas Tax Rebate Not Winning Many Converts

Congress is scheduled to vote on several energy-related measures Wednesday in an effort to help consumers feeling the crunch from ever-rising prices at the pump during an otherwise booming economic period.

Among the issues being debated is a measure that would speed up the scheduling for refineries to get expansion permits. Another would define price gouging and make it illegal.

Lawmakers are looking for solutions ahead of the midterm election, but are facing resistance from within and outside traditional corners.

The White House is trying not to criticize Republican ideas for dealing with the gas price crunch, but a threat by President Bush to veto a GOP proposal to increase taxes on oil companies has led Senate Majority Leader Bill Frist to rethink the source of a $100 per driver gasoline tax rebate.

Frist said Tuesday he changed his mind on his plan, opposed by business leaders, and has gone back to the drawing board. The proposed accounting change would have required oil companies to pay more taxes on their inventory of crude as a way to pay the one-time rebate.

Republican lawmakers, however, haven't given up on the notion of a $100 gasoline rebate for millions of motorists. They say that would be more helpful to consumers than the 60-day gas tax holiday proposed by Sen. Bob Menendez, D-N.J. That proposal would remove the federal government's 18.2 cent per gallon take for much of the summer driving season.

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The White House's top economist said late Tuesday that neither the rebate nor the gas tax holiday would solve the problem of high gas prices.

"One of the things we worry about when we cut the tax on gasoline is that it basically stimulates additional use," said Edward Lazear, chairman of the White House's Council of Economic Advisers.

"Over a longer period of time, it would be a significant problem ... because what it would do is it would encourage us to use more oil, not less and that is the way we got to the situation right now," he said.

As for the rebate, Lazear said it is problematic for other reasons.

"It doesn't have the same kind of direct adverse consequence" as the gas tax holiday tax, "but there are other issues that we have to think about — Is that the best way to be using our tax revenues? Is it the most efficient way to allocate our resources?" he said.

On Tuesday, some Senate Republicans defended their proposal over the one proposed by Menendez.

The gas tax holiday "would amount to about a $20 savings for the average consumer in America. The $100 tax rebate that we are proposing is roughly nine months of gas taxes paid by the average American consumer of gasoline. So what we're talking about here is a substantially bigger benefit to the average consumer," said Sen. Rick Santorum, R-Pa.

But Senate Minority Leader Harry Reid, D-Nev. called the $100 rebate "dead before it was offered." He also accused Republicans of siding with corporations over consumers.

"It's big oil versus the American consumer. And under this administration, this oil-oriented administration, the consumer is losing," Reid said.

The rebate so far hasn't seemed to catch on with voters or editorial pages, and even some House Republicans say the proposal is not up to snuff.

"The really insulting part of this whole proposal was the fact that someone would offer $100 to every American family over this. It is not going to solve the problem," said House Majority Leader John Boehner, R-Ohio. "Over the weekend I heard about it from my constituents a few times. They though it was stupid."

Press Secretary Scott McClellan also invoked "diplomatic speak" to suggest White House displeasure with the idea.

"The president commends Republican leaders in Congress for taking action and looking at options to meet this important priority for the American people. And we'll continue to look at other options. The president has outlined his proposals. But ultimately what we need to do is eliminate the root cause of why we are in this vicious cycle of recurring high gas prices," he said at his daily briefing on Tuesday.

The Energy Department reported Monday that the average cost of regular grade gasoline nationwide is $2.92 a gallon, about the same as last week, but many parts of the country are showing prices at more than $3 a gallon.

Drivers are expected to be dealing with high gas prices through the summer, and that means Congress will continue to struggle for a fix as November's midterm election gets ever closer.

Senate Democrats made it clear once more on Tuesday that they plan to make energy prices a campaign issue this fall. Reid said Democrats are willing to work with Republicans and the White House on energy, but he doesn't think they're serious about finding ways to lower gas prices or U.S. dependency on foreign oil.

"When energy prices have gone up in the state of Nevada almost 50 cents a gallon in the last month — they're now in Las Vegas and Reno well over $3 a gallon — I think that if [Republicans] were serious about working with us, we would long since have [had] something to do to lower our dependence on foreign oil," Reid said.

Frist said he will continue to push the rebate idea, but with the estimated cost of the rebate totaling about $10 billion, and the budget deficit this year expected to be near $400 billion, Republican senators have few avenues to find cash to hand back to voters.

The majority leader also said the Senate Finance Committee is still planning a hearing in the near future on the accounting change for oil companies and other oil company tax-related issues. The accounting change was estimated to increase taxes for the five major oil companies by $4.3 billion over five years, not enough to cover the total cost of the rebate.

ExxonMobil chairman Rex Tillerson, appearing at an energy conference Tuesday, called the proposed charge on oil companies "nothing more than a backdoor windfall profits tax" and a "very dangerous and very poorly thought out step to take."

House Speaker Dennis Hastert, R-Ill., hasn't jumped on to the oil company tax, but he said he wants to know why the companies aren't investing record profits into increased gas production.

"Obviously, we want to turn down the cost of gasoline if we can, but that's something that we've got to work on. It's going to take some time to do," Hastert said.

Representatives from ExxonMobil say the company made $36 billion in profits in 2005 but invested $18 billion to find and produce more oil. Over the last 15 years, the company says it earned $201 billion in profits, while investing $210 billion.

A Republican Policy Committee paper released Tuesday said the oil industry "is investing many billions of dollars to increase supplies of crude oil and gasoline by increasing exploration and production and by expanding refining and distribution capacity." It also said supply increases are expected to surpass demand, which should reduce pressure on rising prices.

FOX News' Jennifer Davis and Jim Mills and The Associated Press contributed to this report.