Tax break debate heats up on Capitol Hill

Senate Democrats are urging House leaders to eliminate oil industry tax incentives as they craft legislation to reduce spending, but Republicans and oil-state Democrats are staunchly opposed to the proposals and say such measures aren't likely to progress.

Top Democrats in the Senate today fired off a letter to House GOP leaders urging them to consider repealing the subsidies as they attempt to craft legislation by early March to fund the government for the rest of this year while cutting spending by $32 billion. The Democrats say the oil industry no longer needs the subsidies.

"The days of big oil companies making billions in record-breaking profits while receiving billions in taxpayer-financed subsidies must end," says the letter from Senate Majority Leader Harry Reid (D-Nev.), Sen. Charles Schumer (D-N.Y.) and others. "The fact is, oil and gas companies are doing just fine while many Americans are still struggling to find work and support their families."

Ending tax incentives for the oil and gas industry could save the federal government $20 billion over the next decade, the senators say. Their proposal closely follows a call by President Obama during his State of the Union address to end tax breaks for the industry. The president also is expected to include a repeal of the tax incentives in his 2012 budget request due out next week.

Republicans have not yet specified where they plan to find the proposed $32 billion in spending cuts, but a House GOP aide quickly made clear that the oil industry's tax incentives won't be on the chopping block. And he questioned whether such a proposal could earn the needed support from oil-state Democrats.


"I'd be curious what Senator Schumer's Democratic colleagues think about this proposal to raise skyrocketing gas and energy prices and destroy American jobs," said Michael Steel, a spokesman for House Speaker John Boehner (R-Ohio).

One of those Democrats, Sen. Mary Landrieu of Louisiana, said it would be tough to convince her to support such a proposal.

"If the whole entire tax code goes under review, then of course this should be under review, too, but to continue to single out this industry, I just don't think is right, and it's really not smart politics, either," Landrieu told reporters in the Capitol last night.

Democratic Sen. Mark Begich of Alaska expressed similar concerns in a statement released this afternoon.

"While I recognize the need to focus on reducing the deficit, eliminating incentives for energy companies to the tune of $30 billion threatens our energy and national security," Begich said. "Energy companies are among the businesses investing and creating jobs at a time when our country needs both. I will fight any measure that ends these incentives."

The oil industry is staunchly opposed to such proposals, warning that cutting the subsidies would harm the economy. And the industry's main trade group is already pushing back against such proposals.

But one of the industry's Senate allies says such proposals are not likely to progress.

"Well, they're going to try them again," Sen. Lisa Murkowski (R-Alaska) told reporters today in the Capitol. "It comes up every year, hasn't gone anywhere."

Reporter Jean Chemnick contributed.

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