While oil and gas companies are inching towards a new tax break in Juneau, they’re fighting to maintain their preferential tax treatment in Washington, D.C.
The Senate Democratic budget is expected to take aim at some controversial tax privileges.
The Senate has not passed a budget in four years. Many contend a budget doesn’t amount to more than a political document that forces senators on the record about what types of programs they’re willing to pay for.
But Idaho Republican Mike Simpson says it’s a bit more than that. He’s a leader on the House Appropriations Committee.
“Partly they’re message documents, but they’re also documents by which we set the appropriations bills. If one gets passed the House and it can’t get past the Senate, as the last four years have indicated, we use that as our budgeting document on what we can put in the appropriations bills,” Simpson says.
After years of chiding, Republicans will get their wish to see a Democratic produced budget. That’s set to come out next week.
And it’s widely expected to cut tax breaks for profitable oil and gas industry.
Jack Gerard is the CEO of the American Petroleum Institute – that’s the oil and gas lobby association in Washington. He says tax revenue from the industry is more beneficial to the government – some eighty six million dollars each day – than ending any tax breaks.
“Do you want real revenue from economic activity, or do you want to be punitive with small provisions?” Gerard says.
Gerard says the tax credits he’s looking to protect don’t cost taxpayers much – about two to four billion dollars per year.
So he says any effort to end the industry’s tax breaks looks like political posturing, not any real attempt to off-set spending.
“The provisions they’re talking about are designed in essence to be punitive measures against the industry,” Gerard says.
Gerard says that other industries get similar tax treatment, and aren’t being singled out.
Eric Toder disagrees. He says the oil and gas industry benefits from unique tax breaks.
“This one doesn’t apply to anybody but them,” Toder says.
Toder is a former deputy assistant secretary of the Treasury during the Clinton presidency. Now he’s at the nonpartisan Tax Policy Center. He says certain tax credits – like the one for expensing exploration and development – don’t cost much, but are unnecessary.
They allow large and small oil companies to write off initial construction over the lifespan of the well.
“Operating costs are always deductible. It’s the expensing and the development, which should be a capital expenditure,” Toder says.
Both of Alaska’s senators have said they do not want to single out the oil industry, that they prefer comprehensive tax reform.
Senator Lisa Murkowski says tax reform is just one piece of an overall deficit reduction package.
“It looks pretty gloomy right now, but if we’re going to be honest with how we’re dealing with our fiscal issues and the reforms that are necessary, it’s got to be reductions in spending on the discretionary, but also on the mandatory side, but also, tax reform has got to be a piece of it,” Murkowski says.
But most in Washington seem to think, the further into this Congressional term we get, the less likely we are to see any real tax reform.