The American Petroleum Institute, the largest trade group representing the oil and gas industry, said it backs an overhaul of the U.S. tax code rather than ending benefits for selected energy companies.
Increasing taxes paid by Exxon Mobil Corp. (XOM), Chevron Corp. (CVX), ConocoPhillips, Royal Dutch Shell Plc (RDSA) and BP Plc (BP/), as proposed by Democrats, would lower oil and natural gas output and raise costs for gasoline and electricity, the institute, the U.S. Chamber of Commerce, Americans for Tax Reform and the Small Business & Entrepreneurship Council said today at a Washington news conference.
“Let’s look at everyone, let’s look at every company across the board, not just pick five,” said Brian Johnson, senior tax adviser at the Washington-based American Petroleum Institute. “You’re clearly trying to form winners and losers.”
Senate Democrats propose repealing about $21 billion in tax breaks in the next 10 years for Exxon, Chevron, ConocoPhillips (COP), BP and Shell, including a $12 billion tax deduction for manufacturing. The money would be used to reduce the federal deficit, Jon Summers, a spokesman for Senate Majority Leader Harry Reid, said today in an e-mail.
Oil companies “don’t need taxpayer handouts,” Reid of Nevada said today on the Senate floor. “As gas prices and oil company profits keep rising, each senator will have a chance to stand with the millionaires or middle class.”
Reid didn’t say when the Senate will vote on the Democratic tax plan, which hasn’t been released as legislation.
Senate Minority Leader Mitch McConnell, a Kentucky Republican, said repealing tax breaks for the largest oil and gas companies would increase gas prices and make the U.S. more dependent on imported oil.
Republicans don’t support revising the tax code as part of a long-term deficit reduction plan being negotiated with the Obama administration. Senator Jon Kyl of Arizona, the Senate’s No. 2 Republican, said in a May 7 radio interview that he and House Majority Leader Eric Cantor of Virginia oppose tax increases as part of such an agreement. As envisioned by administration, the overhaul would include closing loopholes to help boost revenue to the Treasury.
Exxon, the world’s largest company by market value, had a profit of $10.7 billion in the first quarter, its largest in almost three years, the Irving, Texas-based company said on April 28.
An environment of “huge and uncontrolled deficits” and a looming vote to raise the U.S. debt limit are fueling lawmaker backing for fiscal changes, such as raising taxes on energy companies, that may slow the economic growth, said Martin Regalia, chief economist at the U.S. Chamber of Commerce.
“The political dynamics change, and some people think, well, now, we can probably push this through,” he said at the conference. “What you end up with is a messed-up tax code.”
The top U.S. corporate tax rate is 35 percent, though many companies pay much lower effective rates because of breaks and deductions.
A tax overhaul should be coupled with a lower corporate rate, said API’s Johnson. The rate needs to be “in 20s for us to compete internationally,” he said today.
To contact the editor responsible for this story: Larry Liebert at email@example.com.