Senate Democrats announced a proposal Tuesday to repeal $21 billion in tax incentives over 10 years for the five biggest oil and gas companies and use that money to reduce the deficit.
The plan goes after some of the same industry tax incentives that Democrats and President Barack Obama have been targeting for years. The message is also largely the same as when gas prices hit $4 per gallon three years ago: Taxpayers don’t need to foot the bill to help companies earning tens of billions of dollars in profits annually.
“This bill … presents some pretty simple questions for policymakers: Do you think working class families should be the only people sacrificing to lower the deficit?” Sen. Robert Menendez (D-N.J.) told reporters. “It’s time that the big five do the right thing for a change and pay their fair share."
Democrats are able to point to big profits earned by the five companies — ExxonMobil, Shell, BP, ConocoPhillips and Chevron Texaco — during the first quarter of fiscal year 2011.
They are also banking on having a more salient message that the money going to the companies would help reduce the deficit — instead of Obama’s idea of putting it toward clean energy programs that would address gas prices by reducing oil dependence.
Sen. Claire McCaskill (D-Mo.) said she would not have supported the measure if it went to any type of spending.
“There is more hot air surrounding this building about deficit reduction than any other topic right now,” said McCaskill, who joined Menendez and Sen. Sherrod Brown (D-Ohio) at a press conference in the Capitol Building. “And if we cannot end subsidies to the five biggest, most profitable corporations in the history of the planet … then I don’t think anyone should take us seriously about deficit reduction.”
“This should be the easiest step to reduce the deficit,” Brown echoed.
Democrats will still have to answer the question of what they are proposing to do to address gas prices — despite the general consensus that there is little, if anything, lawmakers can do at least in the short term.
“It is dishonest for any of us to say that there’s some magic wand that can be waved and bring down gas prices, unless of course we want to have government price fixing, which I don’t think any of us are interested in doing,” McCaskill said.
Menendez and Brown touted the idea of tapping into the Strategic Petroleum Reserve, while Brown also mentioned efforts to clamp down on oil market speculation and Democratic legislation allowing the Justice Department to take action against oil cartels, like OPEC, on antitrust grounds.
Republicans have emphasized expanding domestic oil and gas and other energy production. The House on Tuesday is primed to give approval to the second of three GOP bills on the calendar this month that would expedite and expand offshore oil and gas drilling.
Senate Minority Leader Mitch McConnell slammed Democrats and the White House over gasoline prices Tuesday morning, labeling them as little more than Jimmy Carter groupies.
“Democrats need to stop deflecting attention from their own complicity in our nation’s overdependence on foreign oil,” McConnell said at the Nuclear Energy Assembly conference in Washington, D.C. “They need to end an approach that hasn’t changed since the Jimmy Carter administration.
“Just like Carter, they’re more interested in using this crisis [of gas prices] as an excuse to push for higher taxes than they are at solving the problem itself,” McConnell said. “And just like Carter, they’re underestimating the frustration of the American people.”
The Democrats’ bill would repeal the Section 199 domestic manufacturing tax deduction for the companies, which Menendez said would amount to about $13 billion over a decade.
It also modifies “dual capacity” foreign tax credit rules that hit the companies for another $6.5 billion, he said.
Other tax incentives repealed in the bill include the tax deduction companies can earn on intangible drilling and development costs, including wages, fuel, repairs, hauling and supplies needed for the drilling of wells.
A deduction regarding capital investment — including the actual costs of discovering, purchasing and developing the well — is also limited, and royalty relief granted in 2005 energy legislation is repealed for some deepwater oil and gas production.
Industry officials say going after the tax incentives will be bad for jobs and the economy.
“More taxes would do nothing to lower prices," said Brian Johnson, senior tax adviser at the American Petroleum Institute. “They would, however, hurt the economy by reducing energy investment and the new jobs that would flow from that investment."
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