US Sen Rejects Oil Windfall-Profits Tax Plan
>>>Well I figured the House would reject it, but I am relieved that it didn't even get that far. Its nice that we have preserved some private property rights in Amerika.<<<
DOW JONES NEWSWIRES
November 17, 2005 8:42 p.m.
(Updates with modification of oil inventory item.)
By Rob Wells
Of DOW JONES NEWSWIRES
WASHINGTON -- Efforts to add an oil industry windfall-profits tax and repeal oil industry tax breaks failed during a U.S. Senate debate over a $60 billion tax-cut bill Thursday.
The developments represent only a limited victory for the industry, however, since the tax bill still contains an estimated $5 billion tax increase on oil company inventories. The Senate acted late Thursday, however, to narrow this tax hike to just the major oil companies such as Exxon Mobil Corp. (XOM), a Senate Finance Committee aide said.
And the bill also would restrict to smaller companies an oil exploration tax break that was enacted in an the energy bill this summer.
Still, the Senate blocked three potential blows to petroleum producers: an attempt to impose a new windfall-profits tax, a repeal of certain tax benefits for oil companies and a new federal law against energy price-gouging. All were defeated on procedural votes.
"It's a really unfortunate attack against the oil industry," said American Petroleum Institute chief economist John Felmy.
"It's fortunate news that the senators recognize that the windfall-profits tax was a bad idea now as it was 25 years ago," he said.
The amendment reflects a desire by Republicans and Democrats to compel large oil companies to divert a portion of their profits to areas such as low-income heating assistance in the wake of record high energy prices.
Critics focused on the record earnings of large oil companies. Last month, for example, Exxon Mobil's reported $9.92 billion quarterly profit was among the largest of any company ever.
The windfall-profits tax measure, sponsored by Sens. Byron Dorgan, D-N.D., and Christopher Dodd, D-Conn., would have imposed a "temporary windfall-profits tax" on crude oil, proceeds of which would provide rebates to consumers to offset high oil and gasoline prices.
The 50% excise tax would apply to "windfall profits" arising from the sale of crude oil above $40 a barrel.
Dorgan and Dodd offered the measure as an amendment to a $60 billion tax-cut bill, which the Senate could complete by Friday.
The Senate defeated the measure on a 35-64 vote, well short of the 60 votes necessary to waive Senate budget rules and consider the underlying windfall-profits measure.
Republicans, such as U.S. Sen. Craig Thomas, R-Wyo., said the measure would impede industry efforts to explore for new energy sources and expand refineries.
"This is something that is not consistent with the idea of the marketplace functioning," he said.
The Senate voted 57-42, short of the 60 votes necessary to proceed, to defeat a measure sponsored by Sen. Maria Cantwell, D-Wash., to enhance the Federal Trade Commission's ability to police against energy price-gouging.
And the Senate voted 48-51 to defeat a proposal by Sen. Dianne Feinstein, D-Calif., to repeal tax breaks for "intangible drilling and development costs" for large oil companies.
Despite these defeats, the tax bill still contains an estimated $5 billion tax increase on oil company inventories. It would prevent the large integrated oil companies from using "last-in, first-out" accounting treatment for a portion of their oil inventories in 2005.
Conservatives had complained the measure was too broad since it defined large integrated oil companies as those with gross receipts of more than $1 billion. Sen. Orrin Hatch, R-Utah, had said that would capture many smaller oil companies.
The Senate narrowed the definition late Thursday. It applied the inventory tax hike to oil companies with "an average daily worldwide production of crude oil of at least 500,000 barrels" in the 2005 tax year. This is designed to capture just a handful of the largest oil companies, a Senate Finance aide said.
The bill also would restrict a recently passed oil exploration tax break to smaller oil companies. Both provisions were included during the Senate Finance Committee vote on Tuesday.
The API's Felmy said the oil inventory accounting provision "is inappropriate" and represented "an attempt to change the tax code to get money from the industry." |
