Bill ending oil company tax cuts clears Senate hurdle

WASHINGTON Mon Mar 26, 2012 7:31pm EDT

The U.S. Capitol dome and U.S. Senate (R) in Washington, August 2, 2011. REUTERS/Jonathan Ernst

The U.S. Capitol dome and U.S. Senate (R) in Washington, August 2, 2011.

Credit: Reuters/Jonathan Ernst

Related Topics

WASHINGTON (Reuters) - Legislation repealing tax breaks for major oil companies passed its first hurdle in the Senate on Monday, but is unlikely to become law, as Republicans and Democrats seek to score political points over rising gasoline prices.

The Senate voted 92 to 4 to proceed with consideration on the bill that would eliminate billions of dollars in tax breaks for the "big five" oil companies: Exxon Mobil Corp, BP Plc, ConocoPhillips, Chevron Corp and Royal Dutch Shell Plc.

The Senate vote came amid increasing nervousness among U.S. politicians - from President Barack Obama to members of Congress running for re-election on November 6 - over possible voter backlash from rising energy costs.

U.S. gasoline prices jumped more than a nickel to average $3.92 a gallon in the past week, a record high for March. Voter anger over surging fuel costs has sent lawmakers scrambling to respond to consumers' energy woes.

But the legislation now up for debate in the Senate would not bring down those rising prices - one of the few points Democrats and Republicans appeared to agree upon.

The debate over U.S. energy policy has fallen mostly along partisan lines, with Democrats stressing the need to end tax breaks for oil companies and invest in alternative energy sources, while Republicans press for more domestic oil and gas drilling.

The lopsided vote in favor of moving ahead with consideration of the oil tax cuts bill reflected political maneuvering in the chamber, not actual support for the measure.

Both Democrats and Republicans think they will score points with voters by staging a Senate debate on tax breaks for the major oil companies - knowing that legislation ending these breaks will not clear the Republican-controlled House of Representatives.

Republicans overwhelmingly supported going forward with weighing the legislation, but only to air their grievances with the measure and to make their own separate case for addressing high gasoline prices.

CORPORATE WELFARE

Sponsored by Democratic Senator Robert Menendez, the legislation would save an estimated $24 billion over 10 years, with the savings going toward extending renewable energy tax credits and reducing the deficit.

With only about seven months before the November 6 presidential and congressional elections, Democrats are hoping to spend time highlighting Big Oil's "taxpayer-funded subsidies," as a Democratic aide portrayed them. These subsidies, the aide added, come amid rising gasoline prices that further contribute to strong oil company profits.

"It's time to end this wasteful corporate welfare," Senate Majority Leader Harry Reid said in speech on Senate floor.

The White House issued a statement in support of the Menendez bill on Monday. The Obama administration has repeatedly called for an end to tax breaks for oil companies, without success.

"This is the Democrat response to high gas prices," Senate Republican leader Mitch McConnell countered. "Frankly, I can't think of a better way to illustrate how completely out of touch they are on this issue."

Republicans, like the oil companies, think that with retail gasoline prices rapidly rising, now is not the time to saddle industry with higher taxes. "There's no evidence to show that raising a tax is going to lower gas prices," a senior Republican aide said.

The tax breaks also exist against a background of chronically high government budget deficits. Many Democrats, including President Barack Obama, argue that the wealthy should do more to help reduce those deficits by taking on a bigger tax liability.

(Editing by Eric Walsh)

FILED UNDER: