Senate Fights Back Windfall Tax on Oil Companies

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Senate Republicans beat back Democratic attempts Thursday to use a $60 billion tax bill to pinch oil and energy companies that have been reporting record profits while consumers pay high gasoline prices.

The bill, which would prevent a number of individual and business tax breaks from expiring, already levies almost $5 billion in taxes on major oil companies.

The energy amendments faced opposition from the Republican majority and stood little chance of success, but they reflected attentiveness on Capitol Hill to high gasoline prices and fears of skyrocketing home heating costs this winter.

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Some GOP senators were already unhappy with tax writers because the bill included a change in accounting methods that would hit large integrated oil companies with $4.9 billion in taxes. Sen. Larry Craig, R-Idaho, said he would vote against the bill if that tax increase remained intact.

"Is it a windfall tax by another name?" Craig said.

Lawmakers were alarmed this fall when profit reports showed five major companies and their global parent corporations earned more than $32.8 billion in the July to September quarter.

Consumers saw gasoline prices soar beyond $3 a gallon in the aftermath of supply disruptions caused by hurricanes, and the politicians called oil executives to Capitol Hill to explain their huge profits.

Democratic Sens. Byron Dorgan of North Dakota and Chris Dodd of Connecticut lost a bid to impose a temporary windfall profits tax of 50 percent on the sale of oil over $40 a barrel, applied to profits not reinvested in increasing domestic oil and gas supplies. They would have returned the money to energy consumers through an income tax rebate. A 35-64 procedural vote defeated their effort.

"The major integrated oil companies have all of the gain. Who has all the pain?" Dorgan asked before answering his own question: "All the American people who are trying to pay for the price of a tankful of gas or trying to figure out how they are going to heat their home in the winter."

Opponents said oil companies shouldn't be punished when lawmakers are urging them to invest in energy production. They're being made political targets, even though they aren't reporting profits as high as other industries, said Senate Finance Committee Chairman Charles Grassley, R-Iowa.

"If you have excess profits tax on Big Oil, do you soon have one on Big Microsoft?" Grassley said.

A similar amendment sought to impose a temporary windfall profits tax on oil companies and use the money to fund a low-income heating assistance program.

The Senate defeated proposals that would have eliminated a tax incentive for major oil and gas companies that allows them a credit for exploration and development cost, and would have banned price gouging during national energy emergencies declared by the president.

The overall bill would cut taxes $60 billion over five years, preserving many tax breaks scheduled to expire unless lawmakers keep them intact. Unlike a version passed by a House committee, the bill would not extend reduced tax rates for capital gains and dividends. Senate GOP leaders vowed to make sure the 15 percent tax rate for investment income will be in the final version of the bill.

The bill would hold back the alternative minimum tax, which will reach into the pockets of millions more taxpayers next year unless Congress prevents inflation from pushing the tax into the middle class. Lawmakers instituted the tax to prevent the wealthy from avoiding all taxation.

The bill also would offer $7 billion in assistance to businesses and individuals hit by Hurricane Katrina and other storms, filling in details of President Bush's proposed Gulf Opportunity Zone.

Other provisions would extend a deduction for state and local sales taxes, investment incentives for small businesses, a business research and development credit and a tuition deduction. Taxpayers would get new incentives to make charitable contributions, at the same time as tax-writers put new curbs on breaks for charity that they've deemed abusive.