Articles
Washington Post: House Votes to End Big Oil's Tax Breaks
02/28/2008
By Steven Mufson
The House of Representatives brushed aside threats of a White House veto yesterday
and voted 236 to 182 in favor of an $18 billion tax package that would rescind
a tax break for the five biggest oil companies and use the revenue to boost
incentives for wind and solar energy and energy efficiency.
The measure now heads to the Senate, where Democrats face a challenge in
getting enough support to bring the bill to a vote. This is the fourth time in
the past year that Democrats have tried to get the package adopted.
The Bush administration, Republican lawmakers and big oil companies condemned
the bill, which they said would raise fuel prices for consumers, discourage oil
and gas exploration in the United States and unfairly discriminate against a
single industry while other manufacturers continue to enjoy tax breaks.
But hours after crude oil hit a new high of $102 a barrel on the New York
Mercantile Exchange, most lawmakers said they saw no reason why the oil
industry couldn't pay an additional $1.8 billion a year in taxes over the next
10 years.
"We don't think it's asking too much to ask them to assist in a
partnership to help find out whether there's a better way to meet our energy
needs," said Charles B. Rangel (D-N.Y.), chairman of the House Ways and
Means Committee. He called the money raised from the oil giants "grains of
sand on the beach."
Supporters of the measure noted that rescinded tax breaks would amount to less
than 2 percent of the profits of the five biggest oil companies. Even if the
companies were to pass along that entire cost to gasoline consumers, it would
amount to about a penny a gallon.
Rep. Rahm Emmanuel (D-Ill.) said "Americans are being asked to pay
twice" -- once at the gasoline pump and then through tax subsidies to the
oil companies.
However, Rep. Kevin Brady (R-Tex.) said that "politicians are shooting at
Big Oil but hitting Americans" in their wallets.
Supporters of the measure also said that by extending tax breaks for wind and
solar energy, the bill would prevent the loss of jobs linked to those
fast-growing industries. Solar and wind energy companies have been arguing that
investment would slow sharply without an extension of investment and production
tax breaks for their industries, which are set to expire at the end of the
year. House Speaker Nancy Pelosi
(D-Calif.) issued a statement saying that 116,000 jobs were at risk.
Republicans mostly supported the bill's renewable energy provisions,
worth about $8 billion.
But at the heart of the floor debate was a provision to exclude oil and gas
companies from a tax break given to U.S. manufacturers in 2004.
Two years
earlier, Congress had given a subsidy to manufacturers -- not including the oil
industry. When the World Trade Organization ruled that the subsidy was a
violation of trade accords, Congress instead came up with a provision that
effectively lowered the corporate tax rate from 35 percent to 32 percent over a
number of years. In addition to the traditional manufacturers that would have
received the earlier subsidy, the new tax break was extended to Hollywood
studios, architectural and engineering firms, and oil and gas companies.
The current bill raises $13 billion by eliminating that manufacturers' tax
break for the five biggest oil companies: Exxon Mobil, Chevron, ConocoPhillips,
BP and Royal Dutch Shell.
"The administration must strongly oppose" the legislation, the Office
of Management and Budget said Tuesday, "because the bill would use the tax
code to target tax increases on a specific industry in a way that will lead to
higher energy costs to U.S. consumers and businesses." The OMB said that
if the bill were sent to the president in its current form, "his senior
advisors would recommend that he veto the bill."
If adopted and signed into law, the legislation would also raise about $3
billion by altering the treatment of foreign tax credits for oil companies. It
would close the so-called Hummer loophole that gives tax breaks on
sports-utility vehicles bought for business purposes.
To spur renewable energy, the bill would extend the production tax credit, now
2 cents a kilowatt hour, for wind for three years; after 2009, tax credits
would not be able to exceed 35 percent of the value of a wind project.
The 30 percent investment tax credit for solar projects would be extended eight
years for commercial customers and six years for residential customers. The
current maximum credit for homeowners would be doubled to $4,000.
The legislation would also channel $2 billion into clean renewable energy
bonds, which would help finance renewable energy investments by the country's
politically powerful rural electric cooperatives. The bill would also expand
tax credits for the installation of pumps for motor fuel with 85 percent
ethanol and for purchases of plug-in hybrid vehicles.
The Bush administration called the clean energy bonds "highly
inefficient" and said they could cost the federal government money outside
the 10-year budget window.