(Photo: Amoil Resources & Technology)
When Republicans bring their bill to expand domestic oil and gas drilling to the House floor Thursday, Democrats will introduce a procedural motion to whack the Section 199 domestic manufacturing tax credit for the five largest oil companies.
Chances for passage are pretty much nil. The motion, which will be introduced by Rep. Tim Bishop (NY-01), is really about putting GOP Representatives on record with a public irked to the bone by rising gas prices and rising oil-company profits. Several Republicans, including tax-and-spending slasher Paul Ryan (WI-01), have said recently they favor oil-subsidy cuts. This will provide them the opportunity to prove it. I wouldn't count on any surprises.
"This is legislation that is long overdue and it is impossible to justify the continuation of these tax credits," Bishop said Wednesday.
"Republicans want to give tax breaks for the oil companies and then just say it’s a tough break for consumers at the pump," said Rep. Edward Markey (Mass.), the top Democrat on the House Natural Resources Committee. "We’re going to give them an opportunity to repeal these tax breaks for the oil companies as they are reporting record profits.”
The credit was passed as part of the American Jobs Creation Act of 2004. The idea behind was to give a broad range of corporations an incentive not to off-shore their work forces. Companies can deduct up to 9 percent of their income derived from domestic manufacturing activities and thus bring down the effective tax rate. Exact figures for how much revenue would be saved depends on oil-company profits, but would certainly reach the half-billion-dollar a year range, or higher.
Expect the argument against the motion from Republicans to be that singling out oil companies in this way unfairly amounts to a tax increase on domestic production that will require more imports of foreign oil and may hurt domestic oil-company employment. And expect to see more back-flips on oil subsidies from Republicans, like these:
Cutting this subsidy is part of a broad Democratic effort to eliminate a variety of oil-company subsidies, something President Obama is keen on accomplishing and that environmentalists have been pushing for years. Earlier in the week, Bishop released that proposed legislation, the Big Oil Welfare Repeal Act. (They're getting better at naming these things.)
While it's encouraging to see Democrats pressing this kind of legislation into the spotlight—even when they know it won't pass—they would do still better to reach further and call for the elimination of all fossil-fuel subsidies, including those for coal. Many of those are obscure but still pricey gifts from the taxpayers.
Among those they could take on is the Foreign Tax Credit on foreign energy operations. An Environmental Law Institute study found that subsidy worth $15.3 billion from 2002-2008. There are also the subsidies for the export of fossil-fuel related goods and services by the Ex-Im Bank, the Overseas Private Investment Corporation and other such institutions. That amount varies every year but averages around $4 billion annually. The list goes on.
If we're serious about weaning ourselves off fossil fuels, and we'd better be, Bishop's proposal is just the first of many steps. But, despite its meager immediate prospects of passage, it's the kind of thing it would be heartening to see a lot more of.