Newspaper article The Christian Science Monitor

Congress, States Look to Tax Oil Firms' Profits

Newspaper article The Christian Science Monitor

Congress, States Look to Tax Oil Firms' Profits

Article excerpt

As public ire rises over high gas prices, it threatens to trigger a backlash against oil companies and their huge profits.

Thursday, ExxonMobil reported first-quarter net income of $8.4 billion. If estimates hold true, the top three American oil companies will have earned more profit in three months than President Bush's proposed savings for eliminating 141 federal programs next year.

So politicians - from Washington, D.C., to Pennsylvania, and California - are pulling out a legislative fix from an earlier oil- price spike: a windfall profit tax that would raise tens of billions of dollars annually.

There are problems. The tax generated far less revenue than expected and actually trimmed domestic oil production when it tried a quarter-century ago.

From 1980 to 1988, the windfall tax brought in $80 billion in gross revenues - far less than the $393 billion projected - before it was abolished, according to an analysis released last month by the Congressional Research Service. It also lowered US domestic production, the analysis found, by somewhere between 1.2 percent and 4.8 percent during that period.

Nevertheless, state and federal politicians are moving quickly to boost oil taxes.

Alaska's senate voted Tuesday to shift from taxing oil production to taxing 22.5 percent of companies' net profits - potentially bringing in billions in added revenue. Though it's not a windfall tax, it is a significant shift to target profits, analysts say.

Other states are focused on the profit gusher, too. In Pennsylvania, Gov. Edward Rendell called for a windfall profit tax on oil. And in California, a taxation committee approved a bill that would impose a 2 percent levy on income above a certain level, leaving it just one step from a full vote by the state assembly, the Associated Press reported.

Meanwhile, Congress is considering a slew of proposals to deal with oil profits and high gas prices. Members of the Senate Finance Committee asked the IRS to provide them with the tax returns for the 15 biggest oil and gas companies in the US. Leading Republicans and President Bush have called for cutting $2 billion in tax breaks. Democrats have advocated halting gasoline taxes for 60 days.

Reps. Edward Markey and Rahm Emanuel, both Democrats, on Wednesday said they would attempt to push their windfall profit tax bill out of the House Ways and Means Committee and onto the House floor for a debate and vote. Other voices, notably Sen. Arlen Specter (R) of Pennsylvania, said that a windfall profit tax should be looked at and might be necessary.

"Senator Specter has expressed support and we think that may be a reflection of growing support among moderate Republicans, which gives us hope," says Jeff Duncan, legislative director for Rep. Markey. "The fact there are multiple bills on this suggests a lot of people are interested. …

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