WASHINGTON – Democratic senators, eyeing high oil and gas prices, seized an opportunity Thursday to use a $60 billion tax cut under debate in the Senate to squeeze energy companies.
The oil and gas amendments have little support among the Republican majority in the Senate, but they reflected sensitivity on Capitol Hill to the high price of gasoline and the fear of high home heating costs this winter.
Opponents warned against doing more harm than good by hurting vital energy companies.
"Without energy we don't have an economy," said Sen. Craig Thomas, R-Wyo.
Democratic Sens. Byron Dorgan of North Dakota and Chris Dodd of Connecticut want large oil companies to pay a windfall profits tax, a 50 percent tax on the sale of oil over $40 a barrel, levied for three years. They propose returning money to energy consumers through an income tax rebate.
"People who will be paying these costs deserve to have some relief," Dodd said. "All we are asking is that these industries reinvest their profits."
Companies could escape the proposed windfall profits tax by reinvesting their profits in expanding refinery capacity, investing in renewable energy or making other efforts to increase domestic oil and gas supplies.
The idea drew immediate opposition.
"It's wonderful to get out here and beat up on the big old oil companies," said Sen. Orrin Hatch, R-Utah. "This populist talk is not what's going to get us oil and gas, nor is it going to bring prices down."
Sen. Maria Cantwell, D-Wash., plans to offer an amendment that would ban price gouging during national energy emergencies declared by the president. Federal authorities could levy civil and criminal penalties for proven price gouging.
"We need to protect consumers from profiteering at the gas pump, and we need to act now," she said.
The bill already includes a change in accounting methods that would hit large integrated oil companies with $4.9 billion in taxes. It drew opposition from some conservative Republicans, who said it amounted to a windfall profits tax on the industry.
Sen. Ron Wyden, D-Ore., won inclusion of a change restricting a tax break for expenses relating to oil and gas exploration to smaller companies.
The oil and gas amendments have little support among the Republican majority in the Senate. Sen. Judd Gregg, R-N.H., has said Congress should think about a windfall profits tax. Senate Finance Committee Chairman Charles Grassley, R-Iowa, has said oil companies already pay tax at corporate rates as high as 35 percent.
The $60 billion tax bill extends many tax breaks scheduled to expire unless lawmakers keep them in place. Unlike a version passed by a House committee, it does not extend reduced tax rates for capital gains and dividends. Senate GOP leaders promised to make sure reduced tax rates for investment income find their way into the final version of the bill.
The Senate's tax package does prevent the alternative minimum tax from reaching into the pockets of millions of taxpayers next year, an item not included in the House bill. Lawmakers must act each year to prevent inflation from forcing the tax onto middle class households.
Other tax provisions extended in the Senate bill include a deduction for state and local sales taxes, investment incentives for small businesses, a business research and development credit and a deduction for tuition and higher education expenses.
The bill also offers about $7 billion in assistance to businesses and individuals hit by Hurricane Katrina and other storms, filling in the details of President Bush's proposed Gulf Opportunity Zone. Senators also added provisions to encourage more charitable giving but curb abuses in the charitable sector.