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Oil industry batting 1.000
The oil industry is batting 1.000 this year when it comes to preserving its tax breaks.
The survival of billions in incentives, which President Obama and Democrats repeatedly have targeted this year, shows that the industry’s lobbying and political muscle remains intact even after a year that saw $4-per-gallon gasoline prices and strong profit reports.
The demise of the bipartisan deficit “supercommittee” robbed industry foes of their best opportunity this year to roll back the incentives, observers say.
She predicts the issue will resurface in subsequent talks over wider tax policy reform, but few expect to see a broad tax code rewrite as the campaign season intensifies.
“The prospect of changes to oil and gas taxes moving before the election remain low,” Tezak said.
The bipartisan deficit panel – which collapsed Monday – was empowered to craft a deal that could not have been filibustered or amended. That made it a threat to the oil companies.
Environmentalists mourned the missed opportunity after the bipartisan deficit panel declared failure.
“For the average family sitting down to their holiday dinner it makes no sense that we will continue to lavish billions of dollars in subsidies on oil corporations while forcing automatic cuts in vital clean air, clean water, wildlife and other domestic discretionary programs,” wrote the National Wildlife Federation’s Adam Kolton in a blog post Monday.
The supercommittee's failure triggers $1.2 trillion in automatic cuts, which will be implemented in January 2013.
The oil industry waged high-profile ad and PR campaigns to preserve its tax incentives.
In particular, the powerful American Petroleum Institute has run ads claiming that higher taxes would hurt the economy, cost jobs and raise prices.
John Felmy, the group’s chief economist, said Tuesday that the industry isn’t declaring victory in the tax battle. “I have learned to never handicap Capitol Hill,” he told reporters on a conference call.
The oil-and-gas industry hasn’t proven completely immune from attacks on its tax breaks, which opponents call pointless and costly subsidies for a mature industry.
The tax title of the $700 billion Wall Street bailout package approved in October of 2008 – a year that saw record prices – capped the oil industry’s eligibility for the Section 199 deduction on domestic production and manufacturing income at 6 percent.
But Daniel J. Weiss, the climate strategy director for the liberal Center for American Progress Action Fund, said the deficit supercommittee was “by far the best chance to eliminate these unnecessary and outmoded tax breaks for big oil.”
“This was a prime opportunity to reduce taxpayers’ subsidizing big oil companies to the tune of $4 billion annually when the richest of those companies are going to make $130 billion in profits in 2011,” Weiss said.
Most Republicans oppose repealing tax breaks to the oil industry, and so do oil-state Democrats.
In May a plan to strip an estimated $21 billion worth of incentives over 10 years from the biggest companies like Exxon and Shell stalled on a 52-48 vote when 60 were needed to advance the measure.
Felmy and other industry advocates say such proposals unfairly single out the oil industry when some incentives are available to a range of industries.
API has also argued that stripping tax incentives could harm pension funds that are invested in the industry.
“We will continue with those messages and be as diligent as we can,” Felmy said.
