Dems hope deficit is trump card in fight over oil industry tax breaks

Leading Senate Democrats have coalesced around a political strategy in their uphill battle to repeal billions of dollars in oil industry tax breaks: Make it all about the deficit.

Caucus leaders and several politically vulnerable members unveiled legislation Tuesday that would repeal $21 billion worth of tax breaks over a decade for the largest oil companies.

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All the savings would be steered toward deficit reduction, which Democrats made their top talking point as they baited GOP foes on nixing the incentives.

“If you are serious about deficit reduction and you say Big Oil’s tax breaks are off limits, how serious can you be?” said Sen. Charles Schumer (N.Y.), a key strategist for Senate Democrats.

Senate Majority Leader Harry Reid (D-Nev.) vowed to open floor debate this week and said he’s eyeing a vote “in the next week.”

Democrats facing tough reelection battles next year — such as Sens. Claire McCaskill (Mo.) and Sherrod Brown (Ohio) — hewed to a line similar to Schumer’s at a press conference announcing the bill.

“If we can’t remove subsidies from these profitable big oil companies, then I don’t know if we can ever get to the really difficult work that lies ahead,” McCaskill said. “This ought to be the essence of low-hanging fruit.”

Other lead sponsors include Sens. Jon Tester (D-Mont.), who is also politically vulnerable in next year’s election, and Robert Menendez (D-N.J.).

A White House spokesman praised the bill. 

“The president has been clear that we need to end unwarranted tax breaks for oil and gas companies. The bottom line is that there are more responsible ways to spend billions in taxpayer dollars than handing them out to oil and gas companies that just posted huge profits. We consider this bill an important step,” spokesman Clark Stevens said.

The Democrats’ strategy could also be a way to pressure Republicans into supporting the legislation, because it addresses two top issues among voters — anger at oil companies over gas prices and the federal deficit.

Still, the strategy isn’t a sure thing. It is drawing attacks from Republicans as well as Democrats who support the oil industry.

The opposition highlights the difficulty of making the measure something other than a political messaging vehicle amid high gas prices and flush industry coffers. Recent Senate efforts to nix oil industry incentives fell well short last February and in June 2010.

Sen. John Cornyn (Texas), chairman of the National Republican Senatorial Committee, told reporters Tuesday that the plans would harm domestic oil producers at consumers’ expense.

“It doesn’t apply to state-owned oil companies from Saudi Arabia or China or around the world, and it disadvantages domestic producers, and of course they can’t absorb those taxes; they get passed along to consumers,” he said.

Sen. Mary Landrieu (D-La.), a strong ally of her home state’s oil industry, also criticized the plan and said she would not vote for it “under any circumstance.”

The Democrats’ bill would seek to end several deductions for a handful of major oil companies such as Exxon, Chevron and BP.

It ends their ability to claim a deduction on domestic manufacturing and production income, and prevents expensing of so-called intangible drilling costs, among other provisions.

Andrew Restuccia contributed reporting.