Obama pitches $1,000 energy rebates

August 1, 2008 12:00:00 AM PDT
The nation's biggest oil companies are reporting another round of record profits, so Barack Obama is proposing a windfall profits tax and rebate plan. He wants to tax oil companies, and give the money to working people. Obama announced his two part plan at a rally in St. Petersburg, Florida.

"The first part of my plan is a $1,000 dollars emergency energy rebate that would go out to families this fall to cover not only rising prices of gas, but also home fuel," says Obama.

Obama says the economy is in trouble, but another round of stimulus checks would only increase the federal debt.

"That's why I'm proposing that we pay for the rebate by taxing the windfall oil profits of companies like Exxon Mobile."

That made a big hit with the crowd in St. Petersburg, but a spokesman for the oil industry says it'll cut into oil exploration.

"The money that Exxon Mobile and other oil and natural gas companies earn on their sales are plowed back into long term investments into the county's energy future," says Tupper Hull from the Western States Petroleum Association.

So, ABC7 asked the head of UC's Energy Institute: Will a windfall profits tax have an effect on oil investments?

"The fact is if you tax oil companies in a particularly targeted way it will reduce their incentive to invest to a certain extent," says Severin Borenstein of the UC Energy Institute.

However, Borenstein says it's not likely to effect the price of oil or the oil companies incentives to explore.

"The amount of money we're taxing isn't going to come out of their exploration because if that were the issue, then they're also giving a whole lot of money back to their shareholders it could come out of that instead."

Borenstein says oil companies might cut back investments of marginal return, but there aren't enough of those to make a real difference in oil profits or the price of gasoline.

On the flip side, McCain took aim at Obama's plan by casting it as another tax hike.

"My friends, the economy isn't hurting because workers and businesses are under taxed. Raising taxes eliminates jobs, hurts small businesses and delays economic recovery.," says McCain.

McCain has proposed temporarily lifting the gasoline tax. We asked professor Borenstein if he liked that plan any better. He doesn't. He believes it masks the real cost of gasoline and could encourage people to use more instead of cutting back.

For more on this topic, check out Mark's Back Story


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