Conservative group: Dems’ oil bill violates tax pledge

Americans for Tax Reform is warning senators that a vote for Democratic legislation that strips tax breaks for major oil companies would run afoul of the group’s pledge to oppose tax hikes that most Senate Republicans have signed.

In a letter to lawmakers ahead of Tuesday evening’s vote, ATR President Grover Norquist argues that deductions that oil companies claim are not subsidies, stating “Every deduction or credit [the bill] proposes to revoke or limit has a specific purpose common throughout the tax code.”

“Raising taxes on oil and natural gas producers will do little to reduce the deficit — perhaps nothing — and only encourage Washington’s overspending problem. It is for these reasons that I urge you to oppose the S. 940, the Close Big Oil Tax Loopholes Act of 2011, as it a violation of the Taxpayer Protection Pledge,” he writes.

The Senate will hold a test vote later Tuesday on a plan backed by Democratic leadership that would strip an estimated $21 billion over a decade in incentives from Exxon, Shell, BP, ConocoPhillips and Chevron.

The measure is not expected to reach the 60 votes needed to advance. But the ATR letter adds a new wrinkle for GOP senators, such as John McCain (R-Ariz.), who might be open to proposals to strip the incentives.

Forty Senate Republicans and one Democrat have signed the ATR pledge to oppose “any and all” increases to personal and business marginal income tax rates, as well as “any net reduction or elimination of deductions and credits” unless it’s matched by other tax rate decreases.

Here is the letter:

Dear Senator:
 
On behalf of Americans for Tax Reform (ATR) and millions of taxpayers nationwide, I urge you to oppose the misnamed Close Big Oil Tax Loopholes Act of 2011, S. 940, a $20 billion tax hike. Voting for the Close Big Oil Tax Loopholes Act of 2011 is a violation of the Taxpayer Protection Pledge.
 
Senate Democrats advocating for this legislation predicate their arguments on three false suppositions:

1.    Taxing oil companies will bring down the price of gas
2.    Washington needs more money
3.    Oil and natural gas producers are the recipients of government subsidies
 
None of these presumptions are true.
 
Coinciding with the recent rise in gas prices were Democrat calls to raise taxes on America’s oil and natural gas producers—some of this country’s finest job creators. This line of reasoning is illogical. Raising the cost of producing crude oil will necessarily raise the price of gasoline.
 
As many Americans now understand, this country doesn’t have a revenue problem, we have a spending problem. Democrats are defaming oil and natural gas companies—with stunts like last week’s Senate Finance hearing—because they see these successful businesses as a way to fund a bloated federal government. President Obama’s Party has demonstrated no interest in seriously reducing spending.
 
While Democrats justify this legislation by arguing that these tax hikes will be used to reduce the deficit, it is entirely possible this is not the case. Because the bill is expected to comply with PAYGO rules, the revenues made available through S. 940 could be used to finance more government spending.  
 
Lastly, oil and natural gas companies receive no subsidies—the government doesn’t pay these companies a cent to produce oil. Every deduction or credit S. 940 proposes to revoke or limit has a specific purpose common throughout the tax code. The foreign tax credit allows American companies to remain competitive abroad. Sec. 199, a deduction available to nearly every domestic manufacturer, was implemented to spur domestic job growth.
 
Raising taxes on oil and natural gas producers will do little to reduce the deficit—perhaps nothing—and only encourage Washington’s overspending problem. It is for these reasons that I urge you to oppose the S. 940, the Close Big Oil Tax Loopholes Act of 2011, as it a violation of the Taxpayer Protection Pledge.
 
Onward,

Grover G. Norquist

This post was updated at 3:37 p.m.