President Obama is essentially daring Republicans to block his proposal to eliminate tax breaks for the oil and gas industry, laying down a litmus test for their pledge to hack away at federal spending.
“If you’re really serious about the deficit — not just spending,
but you’re serious about the deficit overall—then part of what you have to look at is unjustifiable spending through the tax code,” Obama said. “We shouldn’t provide special treatment to the oil industry when they’ve been making huge profits and can afford to further invest in their companies without special tax breaks that are different from what somebody else gets.”
According to the Department of Energy, the repeal would save $3.6 billion in the next fiscal year and $46.2 billion over the next decade. And the proposal would seem to mesh with the agenda of Republican leadership, which has alluded to a government shutdown if Democrats fail to embrace billions of dollars in midyear budget cuts.
“Readmy lips; we’re going to cut spending,” vowed House Speaker John Boehner, R-Ohio. Yet, Republicans have been hesitant to accept the president’s proposal, saying it would eliminate jobs and damage a fragile, rebounding economy.
Even with a Democratic majority in Congress, Obama was unable to move the package past lawmakers heavily influenced by the powerful oil and gas lobby. But with public perception of oil companies at subterranean levels — courtesy of fresh memories of the BP oil spill in the Gulf of Mexico, oil companies’ record profits and soaring fuel costs —it might bolster political pressure to adopt the changes. While Obama portrays elimination of the oil industry subsidies as part of a deficit-cutting strategy, he would spend part of the savings on a variety of clean energy initiatives, one of the cornerstones of his $3.73 trillion budget for next year.
Obama would like to offer a $7,500 rebate for those who purchase electric vehicles, a model that mirrors the cash-for-clunkers program.
His budget also calls for an 88 percent increase, up to $588 million, for new vehicle technologies. In total, the budget contains more than $8 billion for clean energy programs.
The president argues the investment will be paid off through an explosion of new jobs in a field that has yet to emerge from its adolescent stages. However, those in the oil industry say the president is wasting money on unproven technologies.
“It’s no surprise the administration is proposing yet again to raise taxes on the U.S. oil and natural gas industry; but it’s still a bad idea and comes at one of the worst times in our economic history,” American Petroleum Institute President and Chief Executive Officer Jack Gerard said in an e-mail response to The Washington Examiner.
“Besides eliminating thousands of new potential jobs, the increases, over the long term, would actually lower revenue to the government by many billions of dollars as a result of foregone revenues from projects the tax hikes would prevent going forward.”
Stephen Comstock, the group’s tax policy manager, said eliminating the tax breaks would send more jobs overseas, as companies search for better incentives to do work there. Still, he stopped short of saying consumers would pay more at the pump.
