Thursday, April 15, 2010

White House urges cuts to oil and gas tax incentives

The Democratic leadership in Congress was indignant when corporations started restating earnings projections based on changes to the tax code contained in Obamacare.  Let's see if they are equally surprised when oil and gas companies are forced to do the same:
The administration's request that Congress eliminate more than $36 billion in oil and gas industry tax incentives is similar to a proposal the White House advanced in 2009. But this year, the request has extra political weight because the U.S. last September joined 19 other nations in the “group of 20” to phase out subsidies for fossil fuels that produce heat-trapping carbon dioxide when they are burned.

Rep. Dave Camp, R-Mich., the top Republican on the panel, argued that repealing the tax incentives for oil and natural gas would only make the U.S. more dependent on foreign energy sources and curb domestic natural gas production from shale across the U.S. He noted that in 2007, 85 percent of the nation's energy demand was supplied by gas, coal and oil, with nuclear energy supplying 8 percent and the remaining 7 percent coming from hydropower, solar and other renewable sources.

“You cannot increase the cost of producing 85 percent of the energy being used today and expect consumers or employers to benefit from tax incentives that are going to less than 10 percent of the energy being used today,” Camp said.

Mundaca said the targeted tax incentives represent less than 1 percent of the annual revenues generated by the oil and gas industry. As a result, he said, “we don't think it will have a significant effect on prices,” and “we don't expect the job effects to be significant.”
This from the administration who projected that the stimulus bill would keep the unemployment rate below 8%.  (It is now 9.7%)  If this was the only hit the oil and gas industries were going to take, perhaps the effects on prices and jobs would be insignificant.  Unfortunately for these industries and consumers, this is only the beginning.  According to The Los Angeles Times, leading voices in the Senate are considering a 15 cent per gallon tax on gasoline as part of the climate bill:
The tax, which according to early estimates would be in the range of 15 cents a gallon, was conceived with the input of several oil companies, including Shell, BP and ConocoPhillips, and is being championed by Republican Sen. Lindsey Graham of South Carolina.

It is shaping up as a critical but controversial piece in the efforts by Graham, Sen. Joe Lieberman (I-Conn.) and Sen. John Kerry (D-Mass.) to write a climate bill that moderate Republicans could support. Along those lines, the bill will also include an expansion of offshore oil drilling and major new incentives for nuclear power plant construction.

Environmental groups have long advocated gasoline taxes to reduce fossil fuel consumption; the oil industry has spent heavily in recent years to fight taxes, which it says would harm consumers.

In this case, though, several oil companies like the tax because it figures to cost them far less than other proposals to reduce greenhouse gas emissions, including provisions in the climate bill the House passed last year.

The Senate bill's sponsors appear to want the revenue raised from the tax to fund a variety of programs that would lower industrial emissions, including helping manufacturers reduce energy use or boosting wind and solar power installations by electric utilities.

But the tax has encountered stiff behind-the-scenes resistance from some Democrats, who fear the political specter of increasing gasoline prices as the national average cost of gasoline is expected to crest $3 a gallon this summer.

And no other Republicans have publicly announced support for the framework legislation that Graham and the others are circulating on Capitol Hill. Attracting significant Republican support for a bill featuring a tax increase would run counter to historical political trends and to the anti-tax outrage percolating among the "tea party" activists in the GOP base.
They just don't get it.

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