Sam Johnson IN THE NEWS: DMN Democrats target tax breaks for oil, gas producers
Washington,
Apr 15 -
Democrats target tax breaks for oil, gas producers
The Dallas Morning News
Dave Michaels
dmichaels@dallasnews.com
WASHINGTON – Democrats hunting for ways to pay for another jobs bill may train their sights on a familiar foe: oil and gas.
Obama administration officials pressed their case Wednesday for an expansion of the subsidy programs that have channeled $23 billion into renewable energy generation and clean-energy manufacturing.
White House officials say these investments have jump-started a clean-energy industry, created tens of thousands of U.S. jobs and will help reduce fossil fuel use. Texas Instruments was awarded a $51 million tax credit under one such program for building a chip plant in Richardson.
But to expand the programs, which were funded by the 2009 stimulus law, Democratic lawmakers are likely to target tax breaks that benefit oil and gas producers. Many of the beneficiaries of those incentives are in Texas, which has more producing oil wells than any other state.
The Obama administration has called for the repeal of all of the industry's tax breaks. Congress is unlikely to eliminate the whole suite, but it could scale back a manufacturing deduction that was extended to refiners and producers in 2004. Administration officials say such tax breaks skew investments toward fossil fuel production, but don't produce enough resources to significantly reduce oil imports.
"They should never have gotten that in the first place," said Rep. Lloyd Doggett, D-Austin. "We tried to use that one in previous pieces of legislation to pay for beginning to transition us to a less fossil-fuel-dependent economy."
The oil and gas industry opposes the repeal of its tax breaks, but acknowledges the manufacturing deduction is the most vulnerable.
The House has voted to partly repeal that deduction three times in the recent past, according to Lee O. Fuller, vice president of government affairs at the Independent Petroleum Association of America.
White House officials say complete repeal would raise $17.3 billion that could be put toward clean-energy investments.
Republicans criticized that tradeoff during a House Ways and Means Committee hearing Wednesday. The Republicans said the argument simply showed the administration's bias against fossil fuels.
"I, too, support having a cleaner, greener, more energy-efficient economy," said Rep. Sam Johnson, R-Plano. "But this should be market-driven, not government-directed. I don't believe Washington bureaucrats ought to be picking winners and losers."
The administration says tax incentives are less important to domestic oil production than the industry asserts. Removing them would increase exploration and production costs by less than 2 percent, and the resulting decrease in domestic production would be less than 1 percent, according to the Treasury Department.
Over the past decade, lawmakers have increasingly turned to the tax code to subsidize energy production.
But with lawmakers under pressure to reduce budget deficits, tax subsidies are getting closer scrutiny. In a tax bill that passed the House in December, Doggett inserted language that would require government auditors to study the effectiveness of every tax subsidy extended by the legislation.
"This should not just be a matter of a lobbyist sitting down with committee staff and attending a fundraiser," Doggett said Wednesday.
"We need some good, objective analysis of how each of these provisions is working – no matter how well-intentioned and good-purposed each of them are," he said.
Tax breaks also are likely to be scrutinized by the National Commission on Fiscal Responsibility and Reform, which is scheduled to recommend ways to balance the federal budget by 2015.
One of its members, Sen. Judd Gregg, R-N.H., has co-sponsored a sweeping tax reform bill that would repeal many special deductions and exemptions, including many that are directed to the oil and gas industry.
"The issue that has the greatest potential jeopardy for oil and gas taxation would be a broad sweeping restructuring of the tax code," Fuller said. "Because then, everything gets into play, and it's much harder to get the debate focused on the consequences it might have on U.S. production."
