Meanwhile, Senate Democrats are trying to draft their own budget blueprint, which could be put to a committee vote as soon as next week. The latest version, presented at a private lunch Tuesday, includes as much as $2 trillion in fresh revenue to reduce borrowing over the next decade, Democrats said, and avoids changes to Medicare and Social Security.
Facing pressure from cash-strapped voters to do something about surging gasoline prices, Democrats want to put a spotlight on highly profitable oil companies and cut off taxpayer subsidies to the firms.
Their proposal, which Reid said he could bring up for a vote next week, would close several long-standing tax loopholes, yielding roughly $2 billion a year in savings to be applied to lowering the deficit. It would affect only the five largest oil companies, excluding smaller producers.
Rolling back tax benefits for oil companies is a hardy perennial in Congress. In 2007, for example, Democrats capped their “100 hours” agenda by passing a measure that targeted oil companies’ eligibility for a manufacturing tax break that effectively lowered their corporate tax rates.
The break, adopted in 2004 to stimulate job growth by trimming tax rates for a range of manufacturers, gives oil companies and other manufacturers a top rate of about 32 percent instead of 35 percent. It is the biggest single budget item; its repeal would save $18 billion. Other oil company tax breaks are decades old.
But there is no evidence that eliminating them would help lower gas prices. “It is dishonest for any of us to say that there is some magic wand that could be waved and bring down gas prices,” said Sen. Claire McCaskill (D-Mo.).
Oil companies complain that they are being unfairly targeted while other businesses enjoy similar tax benefits.
“Targeting a specific industry or even a segment of that industry is what we would consider punitive and unfair tax policy, and it is not going to get us increased energy security, increased employment and certainly not going to lower the price of gasoline,” said Charles Drevna, president of the National Petrochemical and Refiners Association.
Republicans, meanwhile, have called for expanding domestic oil exploration and decreasing government regulation and fees on energy companies. The House voted last week to require the Obama administration to conduct offshore lease sales in the Gulf of Mexico and near Virginia. The House will vote this week on a proposal to lift Obama’s ban on offshore drilling.
Sen. Robert Menendez (N.J.), who sponsored the Democrats’ oil subsidies bill, highlighted the most recent quarterly profits from the five largest oil multinationals, which totaled $35.8 billion.
“Do you think working-class families should be the only people sacrificing to help lower the deficit?” Menendez said. “Do you think the wealthy and powerful should pay their fair share to help balance the budget, or should we simply let their high-priced lobbyists shield them from their responsibilities?”
Top executives from the five big oil companies are scheduled to testify before the Senate Finance Committee on Thursday.
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Staff writers Steven Mufson and Felicia Sonmez contributed to this report.
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