New bill takes aims at oil tax breaks

WASHINGTON Thu May 10, 2012 6:25pm EDT

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WASHINGTON (Reuters) - Hoping to build on voter anger about high gasoline prices, two U.S. lawmakers launched a new attack on tax breaks for U.S. oil, gas and coal companies on Thursday with a bill they said would cut more than $113 billion in subsidies over 10 years.

The bill goes beyond other recent efforts that have targeted tax breaks for oil companies and includes research programs, loan guarantees and infrastructure funding, said its authors, Senator Bernie Sanders, a left-leaning independent, and Democratic Representative Keith Ellison.

"It is time to end that absurdity," said Sanders, who conceded the bill faced an uphill battle in Congress. He said oil companies were very profitable and did not need the subsidies.

Also targeted is a rule that lets pipeline operators and oil and gas companies operate as "master limited partnerships," a structure under which there is no requirement to pay corporate income taxes.

Republicans in the U.S. Senate blocked Democratic legislation in March that would have stripped $24 billion in tax breaks over 10 years from the "big five" oil companies.

Democratic President Barack Obama, campaigning for re-election in the November 6 presidential election, had urged Congress to end the breaks. But Republicans called the bill in March a stunt that would not help lower gasoline prices.

"I'm not here predicting that we're going to pass this bill tomorrow, but you've got to start somewhere," Sanders told reporters.

ELLISON SAYS BROADER COALITION NEEDED

Some of the biggest oil and gas tax breaks date back to the early 1900s, said Ryan Alexander, president of Taxpayers for Common Sense, a nonpartisan federal spending watchdog group.

"As soon as there was a tax code, the oil industry was getting breaks," said Alexander.

The U.S. tax code has not been revamped since 1986, and is unlikely to be reformed until after the election.

The Sanders-Ellison bill was quickly rebuffed by two fiscal conservatives in Congress aligned with the Tea Party movement who have introduced legislation to end temporary tax breaks for renewable energy producers and certain tax breaks for oil producers.

The measure appears to try to punish the oil and gas industry by taking away basic business expense deductions, said Republican Senator Jim DeMint and Republican Representative Mike Pompeo.

"It should be the same regardless of what business you're in," DeMint said.

Pompeo and DeMint want to end expiring tax incentives for wind and solar energy production, tax credits that are supported by Obama.

The American Petroleum Institute, an oil industry group, denies the industry receives any subsidies or makes current use of any special tax credits or deductions. The industry pays more of its profits in taxes than other manufacturing companies, the API said.

Oil tax breaks are the next big political target for environmental groups that organized thousands of people to encircle the White House last year in protests credited with delaying the proposed Keystone XL crude pipeline from Canada.

They are planning events to spotlight lawmakers who support oil and gas tax breaks. Citing polling data, Bill McKibben, founder of protest organizer 350.org, said such support was out of step with the wishes of most Americans.

But Ellison, who is sponsoring the legislation in the Republican-controlled House, warned environmental groups they would need to work hard to build alliances with fiscal conservatives on the issue.

"It is an organizing challenge, people," Ellison told supporters at a news conference launching the bill. "The coalition is not yet big enough."

(Editing by Peter Cooney)

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