Reid plans March showdown on oil-industry tax breaks

Senate Majority Leader Harry Reid (D-Nev.) is planning a floor vote within two weeks on Democratic legislation to strip billions of dollars in tax breaks for the largest oil companies, such as Exxon, Chevron and BP.

The plan is unlikely to pass, and a similar measure fell eight votes short of the 60 needed last May amid resistance from almost all Republicans and a few conservative Democrats.

But Democrats will use the upcoming vote — which President Obama has demanded — to try and put Republicans on defense politically by casting them as industry handmaidens at a time of soaring gasoline prices.

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Reid’s office said Tuesday that he “hopes to” bring up the legislation, sponsored by Sen. Robert Menendez (D-N.J.), before the Senate breaks for two weeks at month’s end.

Menendez introduced the bill Monday evening. It would repeal several oil-industry deductions to help finance extension of various energy efficiency and renewable energy tax credits.

The plan would prevent major integrated oil companies from claiming deductions on certain drilling costs, strip their ability to claim a lucrative deduction on domestic manufacturing income that’s available to a suite of industries, and nix several other incentives as well.

President Obama, seeking to deflect attacks over rising gasoline prices, has in recent weeks repeatedly argued that oil companies don’t need the incentives at a time of high energy costs.

“Oil companies are making more money right now than they’ve ever made. On top of the money they’re getting from you at the gas station every time you fill up, they want some of your tax dollars as well,” Obama said last week during a speech on energy at a Maryland college. “That doesn't make any sense. Does it make sense?”

But Senate Minority Leader Mitch McConnell (R-Ky.) bashed the effort.

“If someone in the administration can show me that raising taxes on American energy production will lower gas prices and create jobs, then I will gladly discuss it. But since nobody can, and the president doesn’t, this is merely an attempt to deflect from his failed policies,” he said in a statement.

The battle comes as Obama faces political damage over rising gasoline prices that, according to AAA, average almost $3.85 per gallon nationwide. He wants to put his political foes on the spot.

“In the next few weeks, I expect Congress to vote on ending these subsidies. And when they do, they’ll put every single member of Congress on record,” Obama said during Thursday's speech. “I guess you can stand up for the oil companies who really don't need much help, or they can stand up for the American people.”

Oil industry officials and their congressional allies say raising their taxes would discourage investment in domestic energy production and hurt consumers.

A Congressional Research Service report released in May 2011, however, found that the repeal of five key oil industry tax breaks would have little to no impact on gasoline prices.