Oil Company Tax Breaks
OIL COMPANY TAX BREAKS
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Mr. SCHUMER. Mr. President, I rise in support of legislation we will later vote on this week, authored by the Senator from New Jersey, Mr. Menendez. As we all know, he has been championing this legislation for quite some time. He had the prescience and foresight to focus on this idea early on, and I applaud the hard work he has done to build support for it.
I am also glad our leader, Senator Reid, scheduled a vote on it this week. I hope the bill will pass. I have heard that even a few of my friends from the other side of the aisle say they are considering voting for it.
Nothing would be better, in terms of showing bipartisanship and giving the American people hope that we can come to a fair agreement on the budget, than to pass the legislation this week.
In the last election, voters gave those of us who serve in this Chamber two distinct mandates. They told us to do two things at once, either one of which alone would be hard to do. First, and perhaps foremost, they said make the economy grow, create good-paying jobs, make sure of that the American dream which says the odds are that you will be doing better 10 years from today and the odds are that your children will do better than you. That is the American dream.
Since the founding of our great Republic, that candle has burned brightly in the eyes of Americans, whose ancestors have been here since the Mayflower landed, as well as in the eyes of Americans who are just here for a generation or two and even new immigrants.
They also gave us a second mandate--not just grow the economy, not just to employ people but a second one: rein in the out-of-control Federal deficit. The American people, as usual, had wisdom, because both these goals are important. Some say the debt isn't important. I believe it is.
Here is the way I put it: We, the Federal Government, are a blindfolded man, and we are walking toward a cliff. Once we fall off that cliff, there is no getting back. The debate is whether we are 20 feet from the cliff or 200 yards from it. But we know that sooner or later, no matter our distance, if we keep walking, we are going to fall off. Once you fall off, there is no getting back. So that means we have to take the bull by the horns and confront our mounting debt.
It would be hard enough to accomplish one of these two goals. To try to do both at once is a Herculean task. I think everybody is trying to do what is right, regardless of their ideology, but there are strong and different feelings and clear policy differences.
There are many tough choices ahead, but there is at least one choice that isn't tough at all--not by a mile. It is obvious to me and to most Americans, whether it is people you talk to as you go about your State or looking at the polling data, that at this time of fiscal restraint, to continue to give the big oil companies giant tax breaks makes no sense. Getting rid of these corporate subsidies to Big Oil is a no-brainer.
Decades ago, when these breaks were enacted, oil was $17 a barrel. Maybe it made sense then to give companies an incentive to explore and produce. One of the subsidies the Menendez legislation repeals, the oil depletion allowance, dates back to 1913. That is the same year a man named William Burton patented a new oil extraction process called thermal cracking. Big Oil no longer cracks petroleum using Mr. Burton's method. It is an outdated process, but the outdated tax subsidy still remains on the books, amazingly enough.
With oil hovering at $100 a barrel and Big Oil reaping record profits, it defies logic for the government to spend billions of taxpayer dollars on these subsidies. We are writing out a check for $4 billion to the big oil companies. Does that make sense when we have so many other needs and a huge deficit? To me, it doesn't.
At the same time, Americans get hit with a double whammy. When they drive up to the pump, they are paying $4--or close to it--a gallon for gasoline, diesel fuel, and Big Oil is taking some dollars out of their pockets because their taxes--a small percentage of it--go to pay these Big Oil subsidies. How galling.
In my home State of New York, the price of gasoline is up 35 percent, on average, compared to this time last year. Economists estimate that a typical New York family--a typical American family--will pay as much as $1,000 more on gas this year than last. When these families sit around the dinner table on Friday nights after dinner and mom and dad are trying to figure out how they are going to pay their bills, those gas prices make things much harder. Families across the country are struggling to make ends meet, as the economy slowly recovers. They can't afford to get gouged at the pump. With billions of dollars' worth of tax subsidies and gas prices at near record highs, it is no wonder these top five oil companies have just announced mind-boggling profits. These companies are not only among the most profitable businesses in the United States, but they are among the most profitable businesses in the whole world.
In the first quarter of this year, the big five brought in $35 billion in profits. In the past decade, they took home nearly $ 1 trillion--that is with a T. There is nothing wrong with profits in and of themselves. In America, we celebrate success. We want the private sector to thrive and make good profits. But at a time when the government is looking to tighten its belt and we are asking every family to tighten their belt and we are grappling with painful cuts because of the dual goal of growing the middle class but also reducing the deficit, it boggles the mind that we continue to subsidize such a lavishly profitable industry.
There are priorities. I said this to the auto company executives last week when they testified before our Finance Committee. There are priorities. How many Americans would choose to give oil companies an extra subsidy rather than help kids who deserve to go to college pay for their tuition? That is what some of my colleagues are recommending. When I asked Mr. Mulva, the head of Conoco, one of the big five oil companies--I said: Well, which would you choose? He said they are two different things. Mr. Mulva, in all due respect, they are not. If we have to reduce the deficit by a certain amount, if we take the $21 billion we are giving you, that gives us some money to play with that we might be able to deal--not play with but to use for good purpose--that we could give to prevent cuts and help middle-class families defray the cost of tuition to send their kids to college, which is part of the American dream. So they are related--at least in a government-deficit world, at least in a budget world in which we live; every dollar you don't spend on one thing is a dollar you might be able to use on something else.
Try to wrap your head around it. Big Oil is recording record profits. Gas
prices are near an alltime high and we as American taxpayers, are subsidizing the oil industry to the tune of $4 billion a year. You need the imagination of Lewis Carroll, who wrote ``Alice in Wonderland,'' to come up with a more ridiculous scenario.
That is why I strongly support and am proud to cosponsor Senator Menendez's ``Close Big Oil Tax Loopholes Act.''
This legislation will put an end to taxpayer handouts to the five largest integrated oil companies and use that $21 billion in savings to reduce the deficit. This $21 billion is an excellent downpayment on the effort to get our fiscal house in order. If we use this $21 billion, it will be a little easier to reach our huge goal of reducing the deficit. It will be a little easier to complete our dual goals of reducing the deficit but still growing the economy.
The bill repeals a host of Byzantine tax provisions that only a lobbyist could love, such as the deduction for tertiary injectants and the deduction for intangible extraction costs. Some thought these up a long time ago. They have sat in our Tax Code, but they mean lots of money to Big Oil.
Small- and medium-sized oil firms are exempt. The only companies the legislation deals with are the big five--Shell, ExxonMobil, Chevron, Conoco Phil lips, and British Petroleum.
I have heard pundits from the hard right parrot Big Oil's talking point that repealing these giveaways would increase gas prices for consumers. Nothing could be further from the truth. Last week, two major studies--one from the nonpartisan Congressional Research Service and another from the Joint Economic Committee--found that ending these absurd subsidies would not--would not--impact the price of gas. Neither of these studies--these were scientific studies done by economists. They did not have any biases.
In what was perhaps an inadvertent moment of candor at last week's Finance Committee hearing, ExxonMobil's CEO Rex Tillerson said:
Gasoline prices are a function of crude oil prices, which are set in the marketplace by global supply and demand, not by companies such as ours.
Let me repeat what he said because it directly answers the argument that some on the other side of the aisle have made that if we repeal these subsidies, we will raise gas prices because that means the companies would decide to raise them because they are getting less subsidy. Here is what Mr. Tillerson said:
Gasoline prices are a function of crude oil prices, which are set in the marketplace by global supply and demand, not by companies such as ours.
That does not seem like an objectionable comment; it is true. But when he made that comment, Mr. Tillerson of ExxonMobil was conceding that repealing taxpayer-funded subsidies for the big five will not increase prices. Prices are set, as he says, by global supply and demand. That is not to say repealing the subsidies would necessarily bring down prices. We are not making that claim. All along we have been clear that the purpose of this bill is to make a dent in the deficit by repealing tax breaks for the five companies that are the least in need of help from Uncle Sam.
Lowering the cost of gasoline and ridding our country of its dependence on foreign oil requires, of course, a long-term comprehensive approach. It is something we must do. It is outrageous that our country sends $1 billion a day overseas, wealth out of American pockets. To whom do we send them? People we dislike intensely--Ahmadinejad of Iran and Chavez of Venezuela. Why are we doing that? Because we failed to come up with a long-term policy that reduces our dependence on foreign oil.
In the months ahead, I expect the Democratic caucus will unveil a thorough and forward-thinking plan to do just that. In the meantime, if Republicans in the House are serious about deficit reduction, the Menendez bill is their chance to show it now.
If we are going to come together, is this not the easiest place to come together? We are going to have a lot of hard struggles as we attempt to reduce the deficit, as the debt ceiling looms over us. But this is an easy one, and many people on my side of the aisle are scratching their heads. If our colleagues on the other side cannot give in on something such as this, what are they going to give in on? Speaker Boehner said earlier this week he wants to make trillions of dollars in cuts. Here is a good place to start. Indeed, the Speaker himself has said as much.
At one point, he seemed to say it makes some sense to eliminate subsidies to the big five. Let's not forget that Speaker Boehner was in favor of repealing oil subsidies before he was against it.
The bottom line is this: At a time of sky-high oil prices, it is unfathomable to continue to pad the profit of companies with taxpayer-funded subsidies. The time to repeal these giveaways is now. No more should we send $4 billion this year, next year, or any year to the five big oil companies which have made record profits and admittedly, by the admission of Mr. Tillerson, if we take them away from them it would not raise gas prices a plug nickel.
Our plan to cut the deficit begins with ending wasteful subsidies to Big Oil. The Republican plan, as embodied by the Ryan amendment, for which almost every Republican in the House voted begins with ending Medicare as we know it. That is a bright line difference between our side and theirs. We know what choice the American people want us to make.
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