What would you do with the $28 billion? Pay down the deficit? Fund education? Health insurance for more people? Fund the new concentrating photovoltaics designs that will soon supply solar power at $3 a watt?
Sen. Kerry & Rep. Hinchey Introduce Measure To Repeal More Than $28 Billion In Wasteful Tax Breaks & Subsidies For Oil Companies
Washington, DC -- With oil companies experiencing huge, record-breaking profits at the expense of Americans who are facing historic prices at the pump, U.S. Senator John Kerry (D-MA) and Congressman Maurice Hinchey (D-NY) have introduced legislation that would repeal at least $28 billion in tax breaks and subsidies for the country's oil and gas companies. Hinchey introduced the Energy Fairness for America Act in the House today and Kerry unveiled it in the Senate last week.
"As gas prices skyrocket and Americans suffer pain at the pump, it's clearer than ever that we need an energy policy that puts people ahead of big oil," Kerry said. "Oil companies don't need more tax breaks - and they've said so themselves. If we end these tax giveaways, we can invest in an energy plan that ends our dependence on foreign oil and eases the burden on American families. It's time to put our farmers, our families and our future first. I thank Rep. Hinchey for joining me in this important fight and introducing this bill in the House."
Hinchey said, "The oil companies never needed or deserved these massive tax breaks and subsidies in the first place and they certainly don't need them now as their executives roll around in more cash than they know what to do with. Of all ways to save taxpayer money, repealing tax breaks for greedy oil companies has to be near the top of the list of ways to do so. The American people should not have to suffer at the pump so the oil company executives can pay for new mansions, yachts, and high-end vacations."
The Kerry-Hinchey bill repeals provisions in the Energy Policy Act of 2005 that the Republican-controlled Congress passed last year, which contains $2.6 billion over 10 years in tax breaks for oil and gas companies. The bill also contained a $1.5 billion fund for an oil consortium in Tom Delay's congressional district in Texas, bringing the total handouts for oil companies to more than $4 billion over ten years. These giveaways are on top of billions in tax breaks and subsidies already available to the oil industry through 2009 -- breaks that have existed for decades, but would be abolished under Kerry and Hinchey's Energy Fairness for America Act. Additionally, the bill would end the practice of allowing companies to get a break from paying fess owed to the federal government for oil and gas extracted from public lands.
Kerry introduced the Energy Fairness for America Act last week after President Bush said, "Record oil prices and large cash flows also mean that Congress has got to understand that these energy companies don't need unnecessary tax breaks...Cash flows are up. Taxpayers don't need to be paying for certain of these expenses on behalf of the energy companies." Additionally, top oil company executives testified before members of the Senate recently and said that they didn't need the tax breaks that Congress recently approved.
Currently, the Energy Fairness for America Act has three cosponsors in the Senate and 28 cosponsors in the House. Kerry and Hinchey said they will explore ways to pass the measure as an independent bill as well as in the form of an amendment to a larger bill.
A detailed summary of Kerry and Hinchey's Energy Fairness for America Act follows:
Summary of Energy Fairness for America Act:
Existing Tax breaks repealed in the Energy Fairness for America Act:
Repeal expensing of exploration and development costs. This credit allows oil companies to expense "intangible drilling costs" associated with exploration and development, such as labor, fuel, repairs to drilling equipment materials and supplies. Savings: $5.4 billion over 5 years
Repeal excess of percentage over cost depletion. This credit allows "independent" oil companies (those that aren't substantially involved in retailing or refining) to deduct 15 percent of their sales revenue to reflect the declining value of their investment. Savings: $4.7 billion over 5 years
Repeal tax credit for enhanced oil recovery costs. Tax credit for enhanced oil recovery costs. Oil companies can qualify for a 15 percent income tax credit for costs including equipment, labor, supplies of recovering domestic oil associated with the use of "enhanced oil recovery" methods. These include injecting fluids, gases, and other chemicals into the oil reservoir, or using heat to extract oil that is too viscous to be extracted by conventional techniques. Savings: at least $2.0 billion over 5 years
The Energy Fairness for America Act repeals particular sections of the Energy Policy Act of 2005 (Public Law 109-58) for big oil and gas:
Repeal of Election to Expense Certain Refineries. The provision repeals a tax break that enables refineries to expense (deduct) 50 percent of the cost of upgrading an existing refinery or building a new one. Savings: $406 million over ten years
Repeal of Treatment of Natural Gas Distribution Lines as 15-Year Property. The provision repeals a tax break that enables the cost of a natural gas distribution line to be recovered over 15 years instead of 20 years. Under the provision passed in the energy bill the industry can recover their costs quicker. Savings: $1.019 billion over ten years
Repeal of Treatment of Natural Gas Gathering Lines as 7-Year Property.
The provision repeals a tax break that enables the cost of a natural gas gathering line to be depreciated over 7 years instead of 15 years as was required of certain pipelines. Under the provision passed in the energy bill the industry can recover their costs quicker. Savings: $16 million over ten years
Repeal of New Rule for Determining Small Refiner.
The provision repeals a rule change that enabled companies that refined 75,000 barrels per day to still qualify as "independent producers"--and thereby pay lower taxes for production. The provision re-establishes the old definition of an independent producer as anyone producing less than 50,000 barrels per day. Savings: $158 million over ten years
Repeal of Amortization of Geological and Geophysical Expenditures.
The provision repeals a tax break that enables the oil and gas industry to deduct (expense) the cost of searching for deposits. Previously, all geological and geophysical expenses were treated as a capital investment if the company kept the property (i.e. they found oil and gas). The energy bill allowed the industry to deduct these geological and geophysical expenses even in instances where they found oil and gas. Savings: $974 million over ten years
The Energy Fairness for America Act repeals particular sections of the Energy Policy Act of 2005 (Public Law 109-58), providing for royalty relief for oil and gas:
Note: Cost savings estimates not yet available
Repeal Section 343
Repeals royalty relief for "marginal property" oil and gas production.
Repeal Section 344
Repeals royalty relief for natural gas production from deep wells in shallow waters of the Outer Continental Shelf (OCS) in the Gulf of Mexico.
Repeal Section 345
Repeals royalty relief for oil and gas production in deep waters of the Outer Continental Shelf (OCS) in the Gulf of Mexico.
Repeal Section 346
Repeals royalty relief for oil and gas production in the Outer Continental Shelf (OCS) offshore Alaska.
Repeal Section 357
Repeals funding to conduct an inventory of oil and natural gas resources on the Outer Continental Shelf by using 3-D seismic testing and other methods.
The Energy Fairness for America Act also includes language based on the Senate passed tax reconciliation bill that is not expected to be in the conference agreement:
Revaluation of LIFO Inventories of Large Integrated Oil Companies
Disallows LIFO on 75 percent of inventory in 2005. This results in the taxpayer taking a 75 percent haircut on the difference between LIFO and FIFO for that year. This provision increases the amount of income that taxpayers must recognize because prices were rising for much of 2005. (The choice of accounting method has a significant implication under the
common scenario of prices increasing over the long term. FIFO produces a better indication of the value of ending inventory, but it increases net income because older inventory is used to value the cost of goods sold.) Savings: LIFO results in lower taxes when prices are increasing. Raises $4.3 billion over ten years.
Finally, The Energy Fairness for America Act closes a corporate tax loophole that benefits oil companies:
Foreign Oil & Gas Foreign Tax Credit and Income
Under present law, US companies can claim a foreign tax credit for taxes paid to another country. A foreign tax credit cannot be claimed for royalties and similar payments related to an economic benefit. Sometimes it is unclear whether a levy is a tax or a royalty. The provision denies foreign tax credits for payments to a foreign country if the foreign country does not have a generally applicable income tax. This applies to taxes paid or accrued in taxable years after the date of enactment. It also creates a separate basket for oil and gas income and eliminates deferral for foreign oil and gas extraction income. This applies generally to tax years beginning after the date of enactment. Raises: $4.1 billion over five years and $10 billion over ten years.
We know what Bush wants to spend the $28 billion on: THE INVASION OF KHUZESTAN, IRAN FOR ITS 100 BILLION BARRELS OF OIL.
What would you do with it? (no Pebble Nukes, please--they are now obsolete because of the advances made in concentrating photovoltaics). -- NO Hinchey Link yet.
This is a Public Announcement...