Oil CEOs Grilled by Senate Democrats on Tax Breaks
Senate Democrats challenged leading oil industry executives Thursday to justify generous tax breaks at a time when people are paying $4 a gallon for gas.
With the CEOs of the five largest oil companies sitting before the Senate Finance Committee, Sen. Ron Wyden of Oregon played a video of a 2005 congressional hearing in which oil company executives said they didn't need generous tax breaks because oil was selling at $55 a barrel. As the hearing commenced, the price per barrel hovered just below $100.
""You all said you didn't need them in 2005," Wyden said. "You seem to be telling a different story today."
Chevron chairman and CEO John Watson said the companies don't want special tax benefits — just the benefits that other industries get.
But what the oil company chiefs had to say was not the goal for majority Democrats eager to demonstrate before the 2012 election that they stand with consumers against oil companies recording large profits with the help of billions of dollars in tax breaks.
Sen. Orrin Hatch, R-Utah, referred to a large portrait of a dog sitting on a pony to illustrate his thoughts of the proceedings.
"All this hearing is about is providing a justification for tax increases," Hatch said.
"For the president and some of my colleagues," he said, "the answer is always raise taxes. Government spends too much? Raise some taxes. Health care too expensive? Raise some taxes. Gas prices too expensive? I've got it ... Let's raise some taxes."
Democrats acknowledged that a bill to repeal the tax breaks for the companies testifying Thursday would not bring down the price of oil at the gas pump. And no one suggested that the legislation has a future beyond a talking point. Republicans have enough votes to block it in the Senate and the House is controlled by the GOP.
But Democrats insisted that allowing a hugely profitable industry to continue taking billions of dollars in tax breaks is as credible as the notion of a unicorn galloping into the hearing room.
"The issue is who shares" the burden of economic recovery, said Chairman Max Baucus, D-Mont.
Sen. Robert Menendez, D-N.J., the author of a bill that would repeal the tax breaks for the companies testifying Thursday, demanded an apology from ConocoPhillips CEO James Mulva for a press release from the company that said in the headline that the tax cut proposals were "un-American."
Mulva refused, saying that no personal offense was intended.
"Our industry and company are already taxed heavily compared to other industries in the United States," Mulva said.
Flog-the-CEO is a favored tactic of whichever party is in charge on Capitol Hill during a crisis — a reality well known to the powerful chiefs of Big Tobacco, automakers and Wall Street.
But Big Oil seems a particularly inviting target for Democrats seeking to defend their Senate majority in next year's elections.
Thursday's marquee hearing featured the CEOs of Shell , ExxonMobil , ConocoPhillips, BP and Chevron, five companies that booked profits totaling $36 billion during the first quarter. The Democrats say that with profits that high, the big oil companies wouldn't miss tax breaks that average $2 billion a year.
"My guess is you will be able to protect yourselves. ... You're used to prevailing," said Sen. Jay Rockefeller, D-W.Va. Oil companies, he added, are "deeply and profoundly committed to sharing nothing."
Gasoline prices are above $4 a gallon in much of the country. The national average is about $3.96 a gallon for regular unleaded, up from $2.90 a gallon a year ago, according to AAA.
The nonpartisan Congressional Research Service concluded that eliminating the tax breaks would be unlikely to result in higher gasoline prices, which are influenced by a host of factors. The report, released Wednesday, said eliminating the tax breaks would raise about $1.2 billion in 2012. By comparison, the five oil companies had combined revenues of $1.5 trillion, and profits of more than $76 billion, in 2010, the report said.
Menendez' bill would prohibit the five oil companies from taking a tax deduction originally aimed at boosting domestic manufacturing. The bill would also eliminate a tax break that allows oil companies to reduce their American taxes by deducting royalties paid to foreign governments.
Republicans, who now control the House and have enough votes to block legislation in the Senate, oppose tax increases. They are joined on this issue by a handful of Democrats, mainly from oil-producing states. Seven Senate Democrats joined with Republicans to defeat a tax proposal similar to Obama's in February.
On Wednesday, Sen. Mary Landrieu of Louisiana called on fellow Democrats to "stop introducing gimmicks like this that might get you a few political points in the short run, but it is not leading us in the right direction."