The Senate on May 17 rejected, by a 52-to-48 margin, a measure that would repeal $21 billion in tax breaks for the five largest oil producers over the next 10 years (Sen 940). A 60-vote majority was required to take up the proposal.
Senate Republicans almost unanimously opposed the bill, claiming it would cause gas prices to rise. Senate Democrats countered that the GOP was defending big oil tax subsidies at the expense of taxpayers, as the saved revenue would be applied to reducing the federal deficit. Democrats from oil producing states, however, did not support the measure.
The sponsors of the bill vowed to attach it to either a bill raising the debt ceiling or deficit-reduction legislation, but Senate Minority Leader Mitch McConnell, R-Ky., said he would not allow the proposal to be part of those negotiations. "That's not the kind of thing we're going to be dealing with here in connection with the serious talks that are going on with the vice president's group," McConnell said earlier on CNN's "State of the Union." Vice President Biden and a bipartisan team of lawmakers are currently engaged in talks aimed at reducing the budget deficit.
The measure would roll back the Code Sec. 199 manufacturing deduction for the oil and gas industry, Code Sec. 613A depletion for oil and gas wells, the deduction for enhanced oil recovery methods, expenses for intangible drilling costs and modify foreign tax credit rules for dual capacity taxpayers.
During a May 12 Senate Finance Committee hearing on the questionable necessity of continuing tax subsidies for the oil industry, executives from the five largest oil producers claimed that raising taxes could threaten jobs and lower production (TAXDAY, 2011/05/13, C.1). Chairman Max Baucus, D-Mont., however, noted studies that found the elimination of oil and gas tax breaks for the entire oil and gas industry would cause domestic oil and gas production to fall by less than one half of one percent. Democrats also pointed to a 2007 analysis by the Joint Economic Committee, which concluded that repealing the oil and gas tax breaks would not raise energy prices for consumers.
By Jeff Carlson, CCH News Staff
Statement of Administration Policy on Sen 940, Close Big Oil Tax Loopholes Act