As budget negotiations continue this week, lawmakers are gearing up for partisan warfare over a perennial target: tax incentives for the oil and gas industry.
House Republicans today are expected to roll out a fiscal 2012 budget plan that cuts more than $4 trillion in federal spending, but likely protects a number of oil industry tax breaks that Democrats would like to see axed.
GOP leaders have promised hefty spending cuts to reduce the deficit. House Budget Chairman Paul Ryan (R-Wis.) over the weekend outlined parts of the plan, which would reshape the Medicare program and call for strict caps on all federal spending. But he stayed quiet on his plans for the oil industry subsidies.
President Obama and a number of congressional Democrats have urged the elimination of certain oil and gas tax breaks -- such as a deduction on drilling costs, eligibility for a manufacturing tax deduction and the ability to claim tax credits for taxes paid to foreign governments -- to provide a new source of revenue. Obama in his 2012 budget request said ending the tax breaks could free up some $4 billion a year.
But Ryan this weekend said, "We don't have a tax problem."
"Those are the kinds of details that we'll come out later with, that the Ways and Means Committee will work on," he added, when pressed on "Fox News Sunday" specifically about the oil industry tax breaks. "We're not going to go into the little details of which tax expenditure goes and which tax expenditure stays."
Taking aim at Ryan's plan ahead of the official rollout, Democrats are increasing their calls to eliminate the oil industry tax incentives.
"To govern is to choose, and it is not courageous to protect tax breaks for millionaires, oil companies and other big money special interests while slashing our investment in education, ending the current health care guarantees for seniors on Medicare and denying health care coverage to tens of millions of Americans," Rep. Chris Van Hollen (D-Md.), ranking member of the Budget Committee, said in a statement. "That's not courageous, it's wrong."
Sen. Chuck Schumer (D-N.Y.), the third-ranking Democrat in the Senate, said any group that did not support cutting oil industry tax breaks was "extreme."
"Any group that says you don't cut oil subsidies to companies making billions and billions of dollars, subsidies that were passed when the price of oil was $17 to encourage production, and now the price is over $100, and at the same time, says, cut student aid to help qualified students go to college, yes, I believe they're extreme," Schumer said Sunday on ABC's "This Week."
Though louder now, calls to repeal the industry tax breaks are not new. The president proposed some of the changes in his 2011 budget request, and some were later tacked on as offsets to other legislation. But none of the proposals advanced last Congress, and attempts this year to repeal some of the tax breaks have failed in both the Senate and House.
Sen. Lisa Murkowski (R-Alaska), ranking member on the Senate Energy and Natural Resources Committee, said earlier this year, "It comes up every year, hasn't gone anywhere" (E&ENews PM, Feb. 8).
It remains unlikely that Democrats have enough political clout to eliminate the tax breaks this year. In fact, some among their own ranks say they would not support such a proposal.
"I am supportive of keeping some of those subsidies intact, and I most certainly don't think that should be done in this budget negotiation," Sen. Mary Landrieu, a moderate Democrat from oil-state Louisiana, said last night in the Capitol.
Still, Democratic leaders are keeping up the rhetoric.
"Why do we need to continue giving tax breaks to the oil companies?" Senate Majority Leader Harry Reid (D-Nev.) said Sunday on CBS's "Face the Nation." "We need to look at the long-term impact that our spending habits have created."