Tuesday, May 17, 2011
Senate Showdown On Big Oil Tax Subsidies Today
May 17: The showdown on big oil tax subsidies is scheduled to take place in the U.S. Senate this evening as Senators prepare to vote on the Close Big Oil Tax Loopholes Act, S. 940 -- legislation that would eliminate $21 billion of tax loopholes over the next decade for the five largest oil companies. On May 10, a group of Democratic Senators, led by Senator Robert Menendez (D-NJ), announced the legislation which they said would "finally put an end to the unfair tax subsidies that only benefit Big Oil's bottom line and CEOs." [See WIMS 5/10/11]. The bill proposes to use the $21 billion over 10 years in savings realized to be applied to deficit reduction.
The call for ending the subsidies and the legislation have caused intense debate between Democrats and Republicans, as well as between industry and environmental groups over the last several weeks. On April 30, President Obama used his weekly address to call for an end to at least $4 billion annually in taxpayer subsidies to oil and gas companies. He said, "we can afford to do without, these tax giveaways aren't right. They aren't smart. And we need to end them. . ." [See WIMS 5/2/11]. House and Senate Republican leaders have indicated there complete disagreement, calling the proposal an energy tax increase, and said they will not vote to end the subsidies [See WIMS 4/29/11].
On May 12, the Senate Committee on Finance, Chaired by Max Baucus (D-MT) with Ranking Member Orrin Hatch (R-UT) held a hearing on Oil and Gas Tax Incentives and Rising Energy Prices and heard testimony from the CEO's of the Big Oil companies --BP, Exxon, Shell, Chevron, and ConocoPhillips [See WIMS 5/12/11]. The CEO's testified that, "More domestic supply, along with aggressive measures to use energy more wisely, is one of the most effective ways to counter rising energy prices, enhance our energy security and stimulate economic growth. Tax increases on the oil and gas industry which will result if you change long-standing provisions in the U.S. tax code will hinder development of energy supplies needed to moderate rising energy prices. It will also mean fewer dollars to state and federal treasuries and fewer jobs -- all at a time when our economic recovery remains fragile and America needs all three." They said the tax changes under consideration are "misinformed and discriminatory" will "discourage future investment" will "undercut job creation and economic growth" and would "do nothing to help reduce prices."
On May 13, the U.S. Congress Joint Economic Committee, Chaired by Senator Bob Casey (D-PA) released a 9-page report entitled, End Tax Breaks For Big Oil: Reduce the Federal Deficit Without Increasing Prices At The Pump. According to the report, "Critics of repealing these subsidies argue that the targeted tax breaks spur production and lower energy prices. In reality, most of the so‐called incentives have no impact on near‐term production decisions, and thus repealing them would have no effect on consumer energy prices in the immediate future. Even in the longer term, the current proposed changes to these tax provisions would have little impact on global production and a negligible effect on consumer energy prices. More importantly, these subsidies failed to prevent spikes in the price of gasoline, such as the spike that occurred in 2007‐08. At the same time, these tax breaks may have discouraged investment in other industries, including alternative energy sources or energy efficiency, by distorting the effective tax rate on investments in oil and natural gas."
The American Petroleum Institute (API) Vice President of Regulatory and Economic Policy Kyle Isakower criticized the study and said, "This study was neither accurate nor insightful. Annually raising taxes on the industry by billions of dollars would reduce investment in American oil and natural gas development, cost thousands of U.S. jobs, and, over time, reduce both energy production and the taxes and royalties generated from it. It would also increase imports. We wouldn't reduce the deficit, and necessary government investments could be adversely affected. Those advocating tax increases, therefore, would be cutting off their nose to spite their face."
Meanwhile, the Republican staff of the Joint Economic Committee released a study yesterday (May 16) saying, "A weak U.S. dollar due to the Federal Reserve's unprecedented pumping of dollars into the American economy is adding 56 and a half cents* to the price of every gallon of gasoline, according to a new study by the Joint Economic Committee Republican staff. Titled The Price of Oil and the Value of the Dollar, the study notes the value of the U.S. dollar has declined 14 percent since the Federal Reserve began its program of quantitative easing in November of 2008. With oil an international commodity that trades in U.S. dollars, the declining value of the dollar has added $17.04 per barrel to the price of Brent Crude oil. Crude oil is the primary input in the process of making gasoline.
In advance of the expected vote today, Senate Democrats released a video and a series of statements from Republican Senators from the past few years showing their previous support for repealing subsidies for oil companies. Among the statements are: Senator Snowe (R-ME), "Snowe: Subsidies Are "Unnecessary" And "Reckless"; Senator Thune (R-SD), "If In Fact They Are Making Such Enormous Profit, Perhaps They Don't Need The Support Of The Tax Incentives That Are Given To Them By The American Taxpayer"; Senator Collins (R-ME), We Should Not "Continue to Subsidize The Oil And Gas Industry."
Yesterday on the Senate floor, Majority Leader Harry Reid (D-NV) said, ""The bonus checks taxpayers are writing to Big Oil are absurd and obscene. They defy common sense. Big Oil isn't hurting. It doesn't need a hand. In the first three months of this year, the oil industry made $36 billion in profits alone. Not revenues -- profits. That's $12 billion a month. That's $3 billion a week. That's pretty good money. Meanwhile, the American taxpayer is giving these same successful companies $4 billion a year. . . The people who want to keep giving their Big Oil buddies four billion taxpayer dollars a year are the same ones who want to take the social safety net away from the sick, seniors and the poor. These people kick and scream about investing in cancer research, or protecting student loans that help so many afford the rising costs of college. But ask them to recognize the absurdity of giving Big Oil taxpayer money it doesn't need, and they cover their eyes and plug their ears. . ."
Today, Senate Republican Leader Mitch McConnell (R-KY) responded to the Democrats with his own floor statement. He said, "Instead of actually doing something about high gas prices, our Democratic friends staged what one of my Republicans colleagues accurately described as a dog and pony show [referring to the Senate hearing with big oil CEOs]. They rounded up what they believed were a few unsympathetic villains who they could blame for high gas prices, hoping nobody would notice they don't have a plan of their own to deal with them. . . Blame this crisis on somebody else -- and then see if they can't raise taxes while they're at it. . . symbolic votes like this that aim to do nothing but pit people against each other will only frustrate the public even more. "Americans aren't interested in scapegoats. They just want to pay less to fill up their cars. . . Over the past two years, the President has mounted nothing short of a war on American energy, cancelling dozens of leases, imposing a moratorium off the Gulf Coast, arbitrarily extending public comment periods, and increasing permit fees. On the crucial issue of permits, the administration has held them up in Alaska, the Rocky Mountain West, and particularly offshore. . ."
Because Senate Republicans threatened to conduct a "silent-filibuster" if Senator Reid attempted to bring the bill to the floor, he filed a cloture motion on Monday evening on the legislation, which means it could come to a vote at 6:15 PM. Insiders do not expect the bill to get the required 60 votes to pass. Most Republicans and some Democrats including Senator Mary Landrieu (D-LA), are opposed to the bill. In a May 11, floor speech Sen. Landrieu indicated she was strongly opposed to the Menendez and said, "Of the $16.6 billion spent on U.S. energy subsidies over the course of one year, fuels such as renewables, refined coal nuclear, solar and hydro account for more than 85%. You would think, because of this bill, that the big oil and gas companies are getting all the subsidies, making all the profits, paying no taxes, and the rest are suffering. Nothing could be further from the truth. So, why are we doing it? Will it create jobs? No."
Access legislative details for S.940 (click here). Access the complete Democratic Economic Committee report (click here). Access the API release on the study (click here). Access the complete Republican Economic Committee report (click here). Access the Senate Democrats release on previous Republican statements (click here). Access the floor statement from Sen. Reid (click here). Access the floor statement from Sen. McConnell (click here). Access the statement from Senator Landrieu (click here). Access a lengthy analysis of big oil tax subsidy issue from the Center for American Progress (click here).[*Energy/Tax]
Posted by JPMcJ at 5/17/2011 03:31:00 PM