Big Oil set for Senate finance committee show-down
US oil executives are preparing for a face-off with the Senate finance committee on Thursday as lawmakers called on the industry to defend tax breaks worth an estimated $4 billion a year, even as consumers face rising gasoline prices
The finance committee chairman, Montana Democrat Max Baucus, who has been pushing for legislation to repeal the tax breaks, invited senior industry figures to testify at a hearing to be held on Thursday 12 May. It is not yet known who will attend, but they will be quizzed over why the upstream sector needs help from the government at a time of soaring oil prices – and bulging corporate profits.
The hearing comes after President Barack Obama wrote to Congressional leaders, urging them to repeal the subsidies. In his letter, Obama estimated that companies benefit from more than $4 billion in subsidies, despite high oil prices boosting profits substantially.
Speaking last week, Obama added: “We simply can’t afford these wasteful subsidies, especially at a time when we are scouring every part of the budget to try to figure out how we bring down our deficit and our debt.
“If you’re already paying [oil companies] at the pump, we don’t need to pay them in the tax code.”
First salvo fired
Obama wants to invest the savings in alternative-energy sources to reduce US dependence on foreign oil, particularly from Middle Eastern countries or those such as Venezuela, with which it has a stormy relationship.
But the oil industry is ready to fight any attempt to roll back its tax breaks. The American Petroleum Institute (API) has already fired the first salvo in what will become a hard-fought battle.
Speaking at a joint API, US Chamber of Commerce, Americans for Tax reform and the Small Business & Entrepreneurship Council briefing in Washington, DC, on Monday, the API’s senior tax adviser, Brian Johnson, said: "More taxes would do nothing to lower prices. They would not affect the global economics underpinning oil supply and demand, which explain today’s [high] gasoline prices.
"They would, however, hurt the economy by reducing energy investment and the new jobs that would flow from that investment. Gasoline prices and the industry’s strong recent earnings are partly behind the proposals, but neither justifies it. They were bad ideas before and they are still bad ideas.
"Proponents of tax increases need to get serious about US jobs and investment. Oil and natural gas companies can do much more to help, but the right policies are needed to facilitate this. Increasing taxes is not the answer," said Johnson.
This article is part of a collaboration with International Tax Review.
See also: Taxing times in Venezuela | Battlelines drawn over UK tax