Commentary Magazine


Topic: tax breaks

Another Legislative Defeat for Obama

Another (not totally unexpected) defeat for one of President Obama’s legislative proposals today. This time, the Senate rejected a measure to repeal oil company tax breaks, which the president urged them to pass in a stern speech this morning. The vote wasn’t completely split along party lines, with two Republicans supporting the measure and four Democrats opposing it.

Obama will continue to frame this as the GOP protecting the interests of Big Oil, but the fact that it failed in the Democrat-controlled Senate takes the edge off that slightly:

Obama has sought to deflect blame for high gas prices, in part by casting Republicans as allies of big oil companies. He used a Rose Garden speech to urge lawmakers to back the plan.

“Today, members of Congress have a simple choice to make,” Obama said. “They can stand with big oil companies, or they can stand with the American people.”

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Another (not totally unexpected) defeat for one of President Obama’s legislative proposals today. This time, the Senate rejected a measure to repeal oil company tax breaks, which the president urged them to pass in a stern speech this morning. The vote wasn’t completely split along party lines, with two Republicans supporting the measure and four Democrats opposing it.

Obama will continue to frame this as the GOP protecting the interests of Big Oil, but the fact that it failed in the Democrat-controlled Senate takes the edge off that slightly:

Obama has sought to deflect blame for high gas prices, in part by casting Republicans as allies of big oil companies. He used a Rose Garden speech to urge lawmakers to back the plan.

“Today, members of Congress have a simple choice to make,” Obama said. “They can stand with big oil companies, or they can stand with the American people.”

I know this fits nicely with Obama’s class warfare strategy, but it sounds completely counterintuitive. Even if there’s no hard evidence that repealing these tax breaks would raise the price of gas at the pump, it still sounds like a reasonable outcome to the average voter. And that’s the argument the GOP has been making:

Republicans alleged the Democratic proposal would hit struggling consumers.

“That was their brilliant plan on how to deal with gas prices: raise taxes on energy companies; when gas is already hovering around $4 a gallon, then block consideration of anything else, just to make sure gas prices don’t go anywhere but up,” Senate Minority Leader Mitch McConnell (R-Ky.) said on the floor.

Sen. David Vitter (R-La.) said the bill “is not a policy that will do anything but increase the price at the pump and decrease supply.”

“That is the opposite of what we need,” Vitter said on the floor ahead of the vote.

So there is honest disagreement about whether repealing tax breaks for oil companies would raise gas prices. But everyone can at least agree it certainly won’t lower the price at the pump. Which is why this is a puzzling and politically stupid move for the Democrats. Their plan to deal with high gas prices isn’t even designed to lower high gas prices.

Instead, the plan was to use the extra money from ending the tax breaks to invest in green energy programs and pay down the deficit. Ending the tax breaks would bring in an estimated $2 billion per year. Our national debt is nearly $16 trillion. So, enough said on that.

As for using the money to invest in green energy, Obama’s stimulus allotted $38.6 billion for a green energy loan program that has been a disaster. Another $2 billion per year is not going to change that. The purpose of repealing the tax breaks for oil companies is more about Obama’s views on fairness than about achieving any practical purpose. And that fact isn’t going to be lost on the general public.

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Democrats Mull Tax Hike on Oil Companies

President Obama has been arguing for the repeal of certain oil company tax breaks for years, and it looks like the current hike in gas prices may provide the White House with a convenient opening:

After coordinating with the White House, Senate Democrats expect to consider, likely before the end of the month, legislation that would repeal tax breaks for oil and gas companies, a senior Senate Democratic aide said.

Details of the bill are still being decided, but the revenues could be used for consumer relief or to fund alternative energy initiatives, the aide said.

The aide said there are no easy energy solutions and that Democrats will continue to pursue the “all-of-the-above” strategy advocated by the White House.

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President Obama has been arguing for the repeal of certain oil company tax breaks for years, and it looks like the current hike in gas prices may provide the White House with a convenient opening:

After coordinating with the White House, Senate Democrats expect to consider, likely before the end of the month, legislation that would repeal tax breaks for oil and gas companies, a senior Senate Democratic aide said.

Details of the bill are still being decided, but the revenues could be used for consumer relief or to fund alternative energy initiatives, the aide said.

The aide said there are no easy energy solutions and that Democrats will continue to pursue the “all-of-the-above” strategy advocated by the White House.

Republicans argue that increasing the tax burden on oil companies is the last thing we should be doing during a time of high gas prices. “If someone in the administration can show me that raising taxes on American energy production will lower gas prices and create jobs, then I will gladly discuss it,” Senate Minority Leader Mitch McConnell said in a statement to Roll Call. “But since nobody can, and the president doesn’t, this is merely an attempt to deflect from his failed policies.”

While some Republicans maintain that repealing tax breaks for oil and gas companies will lead directly to higher gas at the pump, that claim is debatable. That said, higher taxes on oil and gas companies certainly don’t lead to lower gas prices or energy-sector job creation.

Which makes you wonder why the administration and Senate Democrats are touting this as a way of dealing with rising gas prices. According to Roll Call, Democrats are still considering whether the tax breaks would be used to pay for “consumer energy relief” or “alternative energy initiatives.” In other words, either flat-out election-year bribery with consumer energy rebates, or the subsidization of various Obama-approved “green energy” initiatives. None of which will address the underlying economic reasons behind the rising gas prices.

Republicans have had political success with the gas price debate so far, particularly by emphasizing the importance of pursuing domestic energy sources like the Keystone XL pipeline. But it sounds like Senate Democrats are preparing for another class warfare-tinged fight with the GOP, this time about tax breaks for mammoth oil companies. That could help Obama pivot back to the populist, tax-the-rich strategy that he was pursuing last fall.

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