WASHINGTON -- The U.S. House of Representatives approved $18 billion in new taxes on the major oil companies Wednesday. Democrats cited record profits, as well as record oil prices and rising gasoline costs in a time of economic troubles, said the Associated Press. The legislation, approved 236 to 182, would cost the five largest oil companies an average of $1.8 billion a year over that period, according an analysis by the House Ways & Means Committee. Those companies earned $123 billion last year.
Senate Democratic leaders said they would put the bill—H.R. 5351, the Renewable [image-nocss] Energy & Energy Conservation Tax Act of 2008—on a fast track and try to avoid a Republican filibuster. The White House said the bill unfairly takes aim at the oil industry. President Bush is expected to veto the legislation if it passes Congress.
House Majority Leader Steny Hoyer (D-Md.) noted it was two years ago, when oil cost $55 a barrel, when Bush said oil companies need no government subsidies to pursue more oil or gas. "With the price of oil hovering around $100 do we really believe this incentive is justified?" asked Hoyer. "Do these companies need taxpayer subsidies to look for new product? They don't need any incentive."
Republicans said the measure unfairly targeted a single industry. "It punishes the oil and gas industry. This is wrongheaded. It will result in higher prices at the gasoline pump. It's spiteful and wrong," said Representative Jim McCrery (R-La.). The top Republican on the Ways & Means Committee, which developed the tax proposals, he cited statistics that show that oil companies already pay more taxes than many other industries.
Hoyer acknowledged that "this legislation alone will not bring down gas prices." But he said the measure will provide a needed boost to alternative energy industries—solar, wind, biofuels, and geothermal—and help promote energy conservation. "That may bring down gas prices three years from now, 10 years from now," he said.
The bill would roll back two tax breaks for the five largest U.S. oil companies. One helps manufacturers compete against foreign companies; the other gives American companies a tax credit related to oil and gas extraction outside the country. Democrats estimated that those current breaks would save the oil companies $17.65 billion in taxes over the next 10 years.
The House-passed bill would use that money to promote renewable energy industries by extending tax credits that recently expired or are scheduled to end at year's end. The bill would offer tax credits for more energy efficient homes and a credit for "plug-in" gasoline-electric hybrid cars that would capture electricity off the power grid, once such cars become available in showrooms.
House Speaker Nancy Pelosi, D-Calif., said the shift of tax benefits from oil to alternative energy development was critical to increased energy independence and lowering energy costs. She noted the House twice last year passed similar tax plans, but they died in the Senate. Since then, the price of gasoline has climbed and large oil companies have made record profits, Pelosi said.
"Since Mr. Rangel first brought this bill to the floor last January, the price of gasoline at the pump has gone up 75 cents. 75 cents since we first took up this legislation—imagine what that means to a household's income. The price at the pump has increased 17 cents just in the past two weeks. Just yesterday, oil prices reached another new record at more than $101 a barrel," she said. "This is at a time when oil companies are making record profits. Listen to this, my colleagues: last year, ExxonMobil earned $40.6 billion in profit -- the largest corporate profit in American history. And yet, the Bush Administration refuses to repeal billions of dollars of taxpayer subsidies to Big Oil." (Click here to read the full text of Pelosi's remarks.)
During debate, Rep Jim McDermott (D-Wash.) urged lawmakers to "stop the madness of subsidizing oil companies" when the industry earned $123 billion last year.
The oil industry has lobbied intensely against the House tax legislation, calling it a "discriminatory bill" that targets companies that already pay considerable taxes. The American Petroleum Institute (API) said in a statement: "It is regrettable that the House is resurrecting an idea wisely rejected by Congress last year.New taxes targeting the U.S. oil and natural gas industry will even further reduce our energy security by discouraging new domestic oil and natural gas production and refinery capacity expansions, and will tilt the competitive playing field for global energy resources against U.S. based companies. The discriminatory bill would discourage investment in domestic fuel production, hurt consumers, threaten U.S. jobs and penalize the millions of retirees and workers whose pension funds, IRAs and 401ks are invested in oil and natural gas company stock."
It added, "U.S. oil and natural gas companies pay considerably more in taxes as a percentage of their income than do all U.S. manufacturing companies. According to the federal Energy Information Administration, in 2006, the top 27 energy producing companies paid more than $81 billion in income taxes (an 82% increase in just two years). Their 2006 income taxes, as a share of net income before income tax, averaged 40.7% compared to 22.1% for all U.S. manufacturing companies."
A similar tax proposal passed the House last summer, but it was abandoned in the Senate where Democrats couldn't muster the 60 votes needed to overcome a GOP filibuster. Senate Democrats were maneuvering to avoid a repeat of that with the newly passed House measure.
The chairman of the Senate Budget Committee, Senator Kent Conrad (D-N.D.), said Democratic leaders are considering advancing the House bill under fast-track procedures related to the budget. This process would not permit an indefinite GOP stall.
The White House said singling out the oil companies for higher taxes "would reduce the nation's energy security rather than improve it" and "lead to higher energy costs to U.S. consumers and business." Senior advisers would urge Bush to veto the bill should it pass Congress, the White House said in a statement before the House vote. (Click here to view the full White House statement.)
Click hereto read the full text of H.R. 5351, the Renewable Energy & Energy Conservation Tax Act of 2008.
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