Jon Tester Montana Politics

Tester and Baucus Fight Big Oil Tax Breaks

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While Representative Rehberg was voting entirely for the sake of the press yesterday, Senators Tester and Baucus were working to do something to restore fairness to America’s tax system—voting to end massive tax breaks to the oil and gas industry. The measure was designed to encourage development of alternative energy and reduce the deficit:

The legislation, sponsored by Sen. Robert Menendez, D-N.J., would target more than $2 billion in annual tax subsidies to the so-called Big Five oil companies — BP, Chevron Corp., Exxon Mobil Corp., Royal Dutch Shell and ConocoPhillips.

Had the measure passed Congress, about half of the $24 billion in savings over 10 years would have been reinvested in tax breaks for biodiesel, wind, cellulosic ethanol and energy-efficiency programs.The other half would have been used to reduce the federal deficit.

Now Senate Republicans who killed the measure argue that these ending these tax breaks to oil companies would increase the price of gas at the pump. As is usually the case, though, they ignored the evidence. The Congressional Research Service says that’s simply not true:

For the purpose of economic analysis, the repeal of the Section 199 deduction is equivalent to an increase in the tax on corporate profit. It is widely accepted that a proportional change in taxes on profit affects neither the firm’s incremental costs or revenues, and therefore does not change its behavior with respect to output.  Since output does not change, there is little reason to believe that the price of oil, or gasoline, consumers face will increase.

No one here argues with the idea that industry should be able to make a profit, but it’s hard to accept a system which allows massive, multinational oil companies to pay a much lower rate of taxes than small businesses pay. I think that the five big oil companies have probably reached a point at which they no longer need tax incentives to survive. I suspect they’ll survive with $125 billion in annual profits just fine.

But it was those corporations that Senate Republicans voted to defend yesterday. Not Main Street, not family-run businesses, but massive corporations who recorded $137 billion in profits last year. It’s little wonder that Republicans have received 88 per cent of oil and gas contributions this election cycle.

Does anyone have any doubt about how Representative Rehberg would have voted yesterday, given the $450,000 he has received from the oil and gas industry during his do-nothing career, including $141,000 in this cycle alone?

About the author

Don Pogreba

Don Pogreba is a seventeen-year teacher of English, former debate coach, and loyal, if often sad, fan of the San Diego Padres and Portland Timbers. He spends far too many hours of his life working at school and on his small business, Big Sky Debate.

His work has appeared in Politico and Rewire.

In the past few years, travel has become a priority, whether it's a road trip to some little town in Montana or a museum of culture in Ísafjörður, Iceland.

10 Comments

  • So Baucus, Tester, and Obama want $6 gasoline by the end of summer? What's with Obama hinting at withdrawal from the strategic reserves to keep prices down while setting in motion efforts to drive prices up?

    The framing of the debate of alternate energy versus hydorcarbons is quite disingenuous as we don't put moonbeans or sunbeams into our tanks. The alcohol fuels are fraught with costly problems and mis allocating productive resources.

    How high does Tester want to drive up fuel prices for average Montanans with efforts such as the one you praise?

    What you define as "fairness" comes with a heavy price to wallets and pocketbooks that I don't think will impress voters.

  • Reading is fundamental, Craig.

    Since output does not change, there is little reason to believe that the price of oil, or gasoline, consumers face will increase.

    • Don, your snarky insults are how we usually go wrong. You start something, I retaliate and you up offended and react with indignation, censorship and banning. Can we rise above that nonsense?

      Pricing is not necessarily linked to output as you have suggested. If it were, we would be seeing today's prices trending down, not up. The price is set by the worldwide speculators taking the totality of circumstances into consideration. Asian demand weighs large as to what those consumers are willing to pay. As to my point about cost, oil companies are under no compulsion to sell inventory at prices they deem unacceptable to cover their costs and make a profit. Farmers do the same thing when they see the price at a level they chose not to sell. Here are the list of tax benefits: http://www.encapgroup.com/taxbenefits/ They were created for specific purposes of incentivising risky exploration are recovering the tremendous costs. Take those incentives away and the willingness to sell at a price that doesn't produce the revenue streams they have grown to expect commensurate with the risk factors, and production will go down or they will demand a higher price from the market to offset the loss in revenue from ending the incentives.

      Beyond hydrocarbons, there is coal. Obama's and Tester supported EPA have created new rules that virtually end new coal electric generation plants from being built. Coal produces something like 45% of all electricity in the US. Again, the focus on alternative generation will force electric prices through the roof. Look here for the levelized costs: http://www.eia.gov/forecasts/aeo/images/table_1-l

      • You're right, Craig. Clearly, I am the one who is insulting.

        Fascinating as this is, you claimed that gas would rise to $6 if the Obama plan had passed. I provided evidence that's not true. Now you've changed the topic. That's what you do. Prove your $6.00/gallon claim and then we'll talk. As for me, I trust the experts who did the research.

      • "Take those incentives away and the willingness to sell at a price that doesn't produce the revenue streams they have grown to expect commensurate with the risk factors, and production will go down or they will demand a higher price from the market to offset the loss in revenue from ending the incentives."

        These organizations are by and large corporations. They have a legal responsibility and powerful incentive to turn a profit. They set their prices, production, and expenses at a level that will maximize profit. What Don is saying is that the the relevant measures being considered effectively would be cutting into profits, revenue after expenses. The to change prices or reduce production from optimum levels (assuming these corporations are rational they are operating at optimum levels of profit right now) would bring down their profit margins. As I said, they are corporations, thus, this is unfeasible. Even if net profits decrease, that result cannot be avoided by raising prices.

  • It needs to be pointed out here: Voting for a bill that fails or against a bill that passes is not a test of integrity. It could well be that Tester and Baucus, knowing the bill would be defeated,ran to the chamber to cast their "Yea" votes. After all,it does not change the outcome, and looks good on their record.

    Politics 101: Voting records are cosmetic, usually meaningless. It is so frustrating that such basic manipulation works on you guys so easily, time and again.

  • "It needs to be pointed out here: Voting for a bill that fails or against a bill that passes is not a test of integrity"

    But then, neither is voting for a bill that will pass, or against a bill that will fail. So….voting records are unimportant, in Mark land. As are public statements. Everything else is behind the scenes, and so in Mark's eyes, nothing is indicative of anything, ever – there can be no evidence because on one hand you insist that what politicians say is to be ignored, but then when they do the thing that defines their job (i.e., vote), then that is unimportant as well. Even if they launch lawsuits to fight ruling you disapprove of, that's still not enough evidence of 'action'. And yet you see enormous value in camping out on lawns and shouting second-hand slogans, refusing to make policy suggestions on principle. You see how the way you frame the debate in your mind already limits what you are capable of perceiving?

    • You've pretty well summed it up, an adult acceptance of Realpolitic? Have you finally come to grips with matters? It is indeed frustrating and takes skill, attention to detail and a high level of skepticism to understand what really goes on both in front of and behind the curtain.

      Do you really think that politicians with all of their aides and media specialists are simply letting reality play out, casing votes as conscience dictates??

      There may have been a time in a less sophisticated age when office holders merely cast their votes for or against legislation after negotiation, or logrolling, as we were taught in civics class. But with the advent of groups who analyze and publish selected portions of voting records and endorse candidates based on those records, office holders quickly realized that their votes could be more useful as spectacle than reality. So they joined the bean counting regime, carefully voting for or against legislation as suits their political needs. And fake groups sprang up to offer up highly selective material to base their "scores" on to make various candidates look better than they are. The League of Conservation Voters is one such group, repeatedly giving Max Baucus high conservation scores based on meaningless votes (his 80% score one year came in part from three selected votes on the Joshua Three Monument, a slam-dunk issue that passed by huge margins.)

      There are very few bills where the vote of one office holder determines the outcome, and there a vote has substance. But in most cases, s/he can vote for or against as appearances dictate. This vote, highlighted and praised here, is for a bill that was doomed to failure, so that it is not a test of either Tester's or Baucus's resolve. It should be ignored in forming your opinions about the office holders. It is not a test.

      One time, with MWA, there was a critical vote on an environmental issue where the vote was close. Gore as VP would cast the deciding vote if they could come up with one more … going on memory, but it was 49-50, and Max Baucus was out of town, and was called back to DC to cast his vote. I told John Gatchell, a MWA bigwig, that Baucus would shitcan us. No, he said … so we had a true test of Max's creds. He flew back to DC and voted against the bill, and that was it. Later Gatchell would take solace that a Republican landslide had spared him – "At least we still have Max," he said. Yeah, right, at least Max still had him. That vote was a true test of Max. I doubt LCV used it when they scored him that year.

      All I'm saying is grow up, PW – politics is show business, but there are real and important issues that play out behind the scenes. If you look at only the stage, you'll never understand how it works. Citizenship requires objectivity and skepticism, attention to detail AND holding your party accountable. Jumping up and down in praise for a meaningless vote is hardly useful.

      I have not camped out on lawns. But I do see a movement forming outside the two parties, and the two parties countering it by making protest illegal and using violence against them. Indeed that friction point has substance. Because of it, the public routinely talks now of "the 1%" where before such a thought was forbidden. It has had an effect. Obama and company have taken note, probalby the impetus behind the NDAA. The 1% is speaking, through Obama.

    • Don – I answered this comment with some effort and thoroughness – has that answer not appeared in the queue?

  • It did appear – I read it – but I haven't seen it yet. Unless you left another exceedingly long post? Did this one end with something about losing our right to protest and NDAA?

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