Democrats agree that it’s time to end tax credits and write-offs for the most profitable oil companies, but when it comes to spending the billions that would be added to government coffers if the bill passes, Congress is ignoring President Obama’s call to use the extra money to subsidize alternative energy.
New Jersey Democratic Sen. Robert Menendez, a member of the Senate Committee on Energy and Natural Resources, unveiled legislation Tuesday that would end tax breaks for the five largest oil companies — ExxonMobil, Shell, ConocoPhillips, Chevron Texaco, and BP — and funnel the resulting revenue toward deficit reduction.
But that’s not what Obama requested when he called for an end to tax loopholes for oil companies earlier this year.
Obama last month wrote to Republican and Democratic leaders in the House and Senate to advise them to follow his plan to transfer the tax credits from one industry to the other.
“I am writing to urge you to take immediate action to eliminate unwarranted tax breaks for the oil and gas industry, and to use those dollars to invest in clean energy to reduce our dependence on foreign oil,” Obama wrote in the letter. He has since reiterated the request many times through White House Press Secretary Jay Carney and outlined the plan to transfer the tax credits in his past two annual budget requests.
The Senate is pushing forward with the bill, and Democrats have made clear they have no intention of using the estimated $21 billion that would be “saved” by raising taxes on the oil companies over ten years for anything other than deficit reduction.
“I will not support the bill if it goes for another purpose,” Missouri Democratic Sen. Claire McCaskill, one of the bill’s co-sponsors, said Tuesday. “Every dime that we will realize from this bill will go towards reducing the deficit.”
Menendez agreed, pointing to provisions within the measure that would block money from being transferred to other spending projects.
“All of the savings here goes directly to deficit reduction,” Menendez said. “This is not an argument about there’s other spending we’d like to do.”
A White House spokesman said the president would accept a bill that ends the tax breaks even if it does not directly transfer the savings to alternative energy funding, calling the measure “an important first step.”
“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,” White House spokesman Clark Stevens told The Daily Caller. “We consider this bill an important step.”
This is all not to say that the government will discontinue subsidizing alternative energy companies through favorable tax credits. After all, even conservative Republicans support extending major tax credits to favored alternative energy companies. While the money available in the Treasury from this specific bill might not go directly toward other tax credits, Senate Democrats said they would support bills that offer the same tax breaks now available to oil companies to the green energy industry.
“If the president as part of a broader 2012 package wants to find ways in which we will seek alternative energy sources and seek to incentivize it, I’m all for that,” Menendez said.
It is not clear how exactly the money would go toward reducing the nation’s $1.4 trillion budget shortfall if Congress plans to increase spending through other tax credits anyway. A study published last year found that that since the post-World War II era, the federal government has spent $1.17 for every dollar it brought in, suggesting that in the long run increased revenues were never ultimately used for deficit reduction.
Senate Majority Leader Harry Reid, who threw his support behind Menendez’s bill, confirmed that the Senate would vote on the measure within a week.