Senate Finance Committee Chairman Max Baucus, citing rising gasoline prices and corporate profits, said he will seek to repeal billions of dollars in tax breaks for multinational oil and gas companies.
Baucus, a Montana Democrat, released yesterday what he called a blueprint for legislation that his tax-writing committee will craft. The proposal, offered the day Exxon Mobil Corp. (XOM) reported its highest net income in almost three years, seeks to eliminate a manufacturing tax deduction, reduce a tax credit for royalties paid to other governments and impose an excise tax on “certain Gulf leases,” according to an e-mailed statement.
Baucus’s plan follows President Barack Obama’s call for Congress to end “unwarranted” tax breaks to oil and gas companies. Lawmakers have offered opposing plans to respond to consumer discontent over rising gasoline prices, with Democrats focusing on alternatives to oil and Republicans pledging to give companies more offshore access.
“Now is not the time to stand idly by while large oil and gas companies get billions of dollars in tax breaks,” Baucus said in the statement. He said high gas prices were hurting his constituents.
The average cost of a gallon of gasoline rose to $3.886, up from $2.869 a year ago, according to AAA’s daily tally posted online yesterday.
Baucus’s plan would use the revenue from oil and gas producers to promote clean-energy development.
Democrats “appear committed to a campaign to increase oil prices and drive investment, jobs and oil production overseas,” Senator Lisa Murkowski of Alaska, the top Republican on the Senate Energy Committee, said in a statement.
Next week, House Republicans plan to vote on legislation requiring the Interior Department to approve or deny production permits within 60 days.
Obama’s fiscal 2012 budget request called for the repeal of about $46.2 billion in oil and gas subsidies over 10 years. Baucus’s plan, which doesn’t have a price tag, shares similarities with the president’s proposal.
Both target a domestic manufacturing deduction that oil and gas companies can receive for drilling. Democrats have long maintained that the companies shouldn’t get a benefit designed to boost manufacturing.
Most manufacturers are eligible to deduct 9 percent of their income from “qualified production activities,” while oil and gas companies can deduct 6 percent.
Five Largest Targeted
Baucus’ plan would end tax breaks for “the five largest oil and gas companies that announced tens of billions of dollars of first-quarter profits this week,” according to the statement. Obama’s proposal on the domestic manufacturing deduction would cover all producers, regardless of size.
The president’s plan to repeal the tax break for all oil and gas companies would generate $18.3 billion over a decade, according to the Treasury Department.
Obama’s proposed budget also targets “dual capacity taxpayers,” often oil and gas producers that make royalty tax payments to other governments. That proposal would generate $10.8 billion over a decade.
Baucus said higher tax receipts from oil and gas companies would go toward encouraging the use of fuel-efficient vehicles and support expansion of “alternative energy fueling stations” among other efforts to promote clean-energy infrastructure.
Obama has said clean-energy development can reduce the nation’s dependence on foreign oil and make the U.S. less susceptible to price disruptions.
Proposals to repeal oil and gas tax breaks are unlikely to advance in Congress unless they are part of a broader corporate tax overhaul, given opposition from Republicans and some Democrats, Whitney Stanco, an analyst at MF Global Inc.’s Washington Research Group, said in a phone interview yesterday.
“It’s not going to help consumers,” he said in a phone interview yesterday.
The industry defended itself this week by releasing a study showing that oil and gas stocks outperformed other stocks in public pension funds in four states, Michigan, Missouri, Ohio and Pennsylvania.
“Oil companies aren’t owned by space aliens,” Felmy said. “They are owned by millions of Americans.”
Exxon Mobil, the world’s largest company by market value, reported its net income jumped 69 percent to $10.7 billion in the first quarter.
Kenneth Cohen, Exxon’s vice president of public and government affairs, said in a blog posting on the company’s website that Exxon paid $59 billion in U.S. taxes over the past five years, $18 billion more than it earned in the U.S. in that period.
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