[Pages H2066-H2071]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
MOTION TO INSTRUCT CONFEREES ON H.R. 4297, TAX RELIEF EXTENSION
RECONCILIATION ACT OF 2005
Mr. LARSON of Connecticut. Mr. Speaker, I offer a motion.
The SPEAKER pro tempore. The Clerk will report the motion.
The Clerk read as follows:
Mr. Larson of Connecticut moves that the managers on the
part of the House at the conference on the disagreeing votes
of the two Houses on the Senate amendment to the bill II.R.
4297 be instructed--
(1) to agree to the following provisions of the Senate
amendment: section 461 (relating to revaluation of LIFO
inventories of large integrated oil companies), section 462
(relating to elimination of amortization of geological and
geophysical expenditures for major integrated oil companies),
and section 470 (relating to modifications of foreign tax
credit rules applicable to large integrated oil companies
which are dual capacity taxpayers), and
(2) to recede from the provisions of the House bill that
extend the lower tax rate on dividends and capital gains that
would otherwise terminate at the close of 2008.
The SPEAKER pro tempore. Pursuant to clause 7 of rule XXII, the
gentleman from Connecticut (Mr. Larson) and the gentleman from Texas
(Mr. Sam Johnson) each will control 30 minutes.
The Chair recognizes the gentleman from Connecticut.
Mr. LARSON of Connecticut. Mr. Speaker, I yield myself such time as I
may consume.
Mr. Speaker, I rise today on behalf of my Democratic colleagues to
offer a motion to instruct the House conferees on the tax cut
reconciliation conference committee.
This motion has two simple yet important provisions. First, it closes
over $5 billion in unneeded tax loopholes and subsidies for oil
companies. It eliminates the ``last in/first out,'' LIFO, accounting
method for oil companies, which amounts to $4.3 billion over the next
10 years. It prohibits oil companies from writing off costs associated
with oil and gas exploration, which is about $292 million over the next
10 years. It limits the foreign tax credit that companies receive for
the taxes they pay to oil-producing countries.
This rollback amounts to, for oil companies, a mere $540 million a
year and $135 million each quarter.
To put this in appropriate perspective, this represents approximately
1.6 percent of Exxon's first-quarter profits in 2006 alone. Second, it
ends the extension of lower capital gains and dividends tax rates.
We offered this motion last week. The distinguished gentleman from
Washington State put forward the amendment in the motion because of the
way that Americans are being hit this time both at the gas pump and
again because we hoped that the other side would join us in this
effort. Unfortunately, only nine Republicans voted for the motion, and
it failed 190-232.
We offer this again because the American people simply cannot
understand why their government would hand billions in tax breaks and
subsidies to an oil industry that by all measures is enjoying an
unprecedented level of success. In fact, last week, President Bush
discussed his plan to address the rising price of gas and oil.
During his remarks the President stated, ``Record oil prices and
large cash flows also mean that Congress has got to understand that
these energy companies do not need unnecessary tax breaks. I am looking
forward to Congress to take about $2 billion of these tax breaks out of
the budget over a 10-year period of time. Cash flows are up, taxpayers
do not need to be paying for certain of these expenses on behalf of
energy companies.''
Now, if the President of the United States can call for this, it just
seems logical to those of us on this side of the aisle that Congress
ought to be able to join with the other body. This body ought to
embrace what the Senate has already done and concluded, and be in
harmony with the Senate and the President of the United States.
Mr. Speaker, I reserve the balance of my time.
Mr. SAM JOHNSON of Texas. Mr. Speaker, I yield myself such time as I
may consume.
Mr. Speaker, you know, talking about helping our companies, the
energy bill that my opponent referred to
[[Page H2067]]
was equally divided among oil, among chemical, among hydrogen, among
all those renewable-type fuels so that we could bring this Nation into
self-sufficiency. Today's Democrat motion to instruct conferees is just
as bad as it was last week when it failed by a vote of 190-232.
Yes, gas prices are high, and I can't name anyone I know who is happy
about having to pay $3 a gallon for fuel. But this motion is the wrong
policy on any number of fronts. It is bad energy policy. It is bad
economic policy, and it is bad tax policy.
The Democrats just do not want to understand the law of supply and
demand. When supply is low and demand continues to rise, the price goes
up. We are seeing continuing demand for gasoline both here in the
United States and around the world. The demand for gasoline is growing
leaps and bounds in developing economies such as China and India. We
are not the only consumers of gasoline in the world, and we are sure
not the ones in charge of supply. In the world, crude markets, the
price of oil is bumping along at record prices. The worldwide demand
for oil is chasing up the price of the basic commodity. This basic law
of supply and demand is something that the Democrats think Congress can
repeal, but they are sadly mistaken. This motion to instruct conferees
is a reflection of this mistake.
The law of supply and demand for gas also has another component that
my friends just want to complain about; that is on the supply of
refined oil in the form of gasoline. They talk out of both sides of
their mouth on the issue of price because they have refused to allow
new refineries to be built since 1976. There are 148 refineries in
America today, down from 324 in 1981. And last year, during the
hurricane season, we saw that refining capacity damaged. This creates a
choke point in supply regardless of the rising cost of crude. The
ability to refine oil is itself a problem and a demand problem. We have
a problem with refineries running close to capacity and some of them
shut down due to damage and basic maintenance.
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At this point in the year, refineries also have to start blending
niche fuels due to clean air requirements.
I support clean air. We all do. We like to breathe clean air. My
grandchildren like to breathe clean air. But the blending of special
fuels for 17 particular markets hampers the ability of refineries to
keep running at capacity as they switch from one fuel to another.
The pipelines that move fuel to terminals, the trucks that run from
terminals to stations are not carrying generic fuel. They have to move
boutique fuels. All of that adds costs and, more importantly, causes
disruptions in supply so we end up seeing some gas stations without any
fuel at all.
Yet our Democrat friends just want to complain about some big
conspiracy and own up to no responsibility for creating these supply
problems that then drive the price to $3 a gallon. It is easier to send
out press releases that claim they are attacking Big Oil than it is to
take a semester of Economics 101.
Mr. Speaker, I reserve the balance of my time.
Mr. LARSON of Connecticut. Mr. Speaker, I yield myself such time as I
may consume.
Mr. Speaker, I certainly think that the President of the United
States understands the laws of supply and demand and has prevailed upon
this Congress to take action with regard to this.
More importantly, back in my hometown, John Mitchell, the former
Republican mayor of South Windsor, Connecticut, and past president of
the Independent Connecticut Petroleum Dealers, says there is no
correlation between what is going on in this country between the laws
of supply and demand and what is happening with home heating oil and
what is happening at our gas pumps. He says the only thing that is
happening here is a matter of fear, speculation and greed.
Mr. Speaker, I yield 3 minutes to the gentlewoman from Connecticut
(Ms. DeLauro), someone who understands that and someone who has
represented the State of Connecticut with distinction.
Ms. DeLAURO. Mr. Speaker, might I say to my colleague on the other
side of the aisle on the issue of refineries, ExxonMobil has said that
they will not build refineries, that it was not part of their business
plan.
The issue of switching from MTBE to ethanol was something that was
known a year and a half ago or more, and the decision, they knew it,
they could prepare for it, they wanted it to happen, and they did not
make the preparations to make that switch-over.
Mr. Speaker, as Americans struggle with $73 barrels of oil and gas
prices that could reach $4 a gallon in the coming months, we have heard
every excuse in the world for why these prices have skyrocketed.
We have been told that refineries are being victimized by overbearing
environmental regulations and that Americans simply do not understand
the laws of economics and that the market is simply responding to high
demand.
Well, it does not take an economist to recognize that the oil
companies are making out like bandits. In 2005 alone, ExxonMobil, the
Nation's largest oil company, earned more than $36 billion in profits,
profits that were 31 percent higher than the year before. Not far
behind is Shell, with $22.9 billion of profit; BP, with $19.3 billion
of profits; and Chevron, which took in $14.1 billion.
So what is this Republican majority proposing? To usher through more
tax cuts for oil companies in their next round of corporate tax
giveaways. This only hours after this House finally relented and voted
to give the FTC the authority to investigate price gouging, something
Democrats have been calling for for the last 8 months.
Why on earth we would be offering still more tax cuts to an industry
that is enjoying record profits is beyond me.
Even the President has acknowledged that we should be paring these
gifts to industry back. It is interesting to note that he did not know
in the energy bill that he signed that they had $9 billion in the
energy bill that he signed; and, in fact, his administration gave a $7
billion windfall to the oil companies by waiving their royalty payments
to the Federal Government.
This majority is not doing what it should be doing in this bill. What
they are providing is more tax cuts.
With the Larson motion, which would prohibit oil companies from using
an accounting gimmick to reduce their tax obligations, we have an
opportunity to say enough. No more financing $400 million executive
retirement packages with taxpayers' dollars. With soaring budget
deficits, war and a host of needs here at home, we have better things
to do with the taxpayer money than to line the pockets of this
majority's political friends and an industry reaping historic profits
from American families. Let us get that process started by passing the
Larson motion.
Mr. SAM JOHNSON of Texas. Mr. Speaker, I yield myself such time as I
may consume.
Mr. Speaker, I wonder how many people in this country have stocks in
gas companies, ExxonMobil, for example. You are making a profit, too.
Stop and think about it.
Ms. DeLAURO. If the gentleman would yield, I have no stock in oil and
gas companies.
Mr. SAM JOHNSON of Texas. Well, I didn't understand her.
You claim you want to tax away the profits of oil companies, and yet
they do not even come here with their tired old windfalls profit tax
because they know it is a bogus policy that doesn't pass the laugh
test. Instead, they come here convoluting tax items that sound
intriguing in a 15-second sound bite.
The first of the items is to switch the way that oil companies
account for their inventory. They claim to pick up on a Senate idea to
move away from long-standing accounting rules for inventory. Well, what
this motion would propose to do is go back in time to the 1930s to
theoretical inventories still held by oil companies. We know darn well
there is no oil inventories held by oil companies since the 1930s, yet
the Democrats here propose that we go back that far to tax theoretical
inventory, propose a one-time retroactive tax back to the 1930s.
Such a proposal is scary even for my friends on the other side of the
aisle. They did not use some economic policy that was developed by a
PhD. No, they simply decided how many billions of dollars they wanted
to raise in taxes on oil companies, and with some simple division it
came out to $18.75 for each
[[Page H2068]]
layer of theoretical inventory for every oil company back to the 1930s.
This provision has no real policy behind it. It simply is a big ATM
withdrawal from oil companies to punish them for following the laws of
supply and demand. They couldn't pass the laugh test on the windfall
profits tax, so instead they came up with a tax that is retroactive to
the 1930s. We have to defeat this proposal.
Mr. Speaker, I reserve the balance of my time.
Mr. LARSON of Connecticut. Mr. Speaker, I yield myself such time as I
may consume.
Mr. Speaker, I say to my distinguished colleague and good friend and
learned man who everyone respects in this Chamber, it is the
Republican-controlled Senate that passed these initiatives. It is the
Republican President that has called for these rollbacks.
I said last week that the administration's policy seems to be ``leave
no oilman behind.'' Or as Thomas Freeman has pointed out in the New
York Times, from an international perspective, it seems like the policy
is ``leave no mullah behind'' because of what we end up exporting
abroad and how that money in turn is used against us.
Mr. Speaker, I yield 5 minutes to the gentleman from Washington (Mr.
McDermott), who articulated this position last week.
(Mr. McDERMOTT asked and was given permission to revise and extend
his remarks.)
Mr. McDERMOTT. Mr. Speaker, I sometimes wonder when I am out here on
the floor whether anybody ever listens to anybody.
The distinguished gentleman from Texas who opposes this motion acts
like some kind of wild-eyed liberal. Left-wing bunch of
environmentalists come up with this idea all by themselves. This came
out of the Senate, I would tell my distinguished colleague. This came
out of the Republican Senate. This is an idea that sprang from
conservative Republican minds who understand that there is some reason
to think that the oil companies have enough.
Now, as Yogi Berra used to say, ``It's deja vu all over again.'' We
are running the same script tonight as we ran about a week ago.
A week ago, the Republicans voted down my motion to stop the oil
companies from legally cooking their books to avoid paying their fair
share of Federal taxes. My distinguished colleague from Connecticut
comes tonight with his motion.
The price tag for the oil industry is $5 billion, not by raising
taxes, just by closing loopholes. But they would rather keep the money,
inflate their profits and earn more money for buying bonds to finance
our Federal deficit and charge the American people more at the pumps.
Now, for Big Oil, too much is not enough. That is all fine and good
with this Republican leadership in the House, but it is not right with
many of my Republican colleagues who know it. In fact, last week a
handful of them were brave enough to vote with the Democrats and voted
in favor of this motion. Now here we are, and we are going to give you
a second chance.
Do we pave a road with gold for Big Oil? Do we allow them to continue
to cook their books, to keep $5 billion that rightfully belongs to the
American people? Even the Senate Republicans cannot buy that. My
goodness, guys, come on. Even the Senate Republicans.
But, of course, the House Republicans are different. Your gas tank is
empty. Your wallet may be empty. Your credit card debt may be rising
with gas prices, but the party of 1 percent, which is really what the
Republican Party is, does not care. Because Big Oil is part of the 1
percent of America that the House Republicans reward. They are going to
pay for it by taking it out of the hides of 99 percent of the rest of
America, the middle class.
I join gladly with my esteemed colleague from Connecticut to ask the
House Republicans to act on the Senate Republican proposal which we
support. They offered to buy you a tank of gas. That is what the leader
in the other body said: we are going to give you a $100 rebate. Even
industry turned that down. What good is it giving people two tanks of
gas? That is simply not enough.
The American people deserve more than a Republican handout. They
deserve a prescription to end America's addiction to oil. And in the
weeks since the Republicans first voted down this motion, the price of
gasoline has risen again.
You cannot seem to get the message. There is no surprise here. Net
income of oil companies has nearly tripled since 2002, and the margins
for oil refining have risen 700 percent. The answer to date from this
administration and House Republicans is to give them all they want, and
they want it all.
The American people are becoming a wholly owned subsidiary of Big
Oil, and the House Republicans are going along for the ride. But with
the enthusiastic report of the President, House Republicans are showing
what their energy strategy really looks like. It is not about
extracting oil. It is about extracting every dime from the American
people for the oil companies. They are drilling in your wallet, and a
gusher of consumer debt is paving a road of gold for Big Oil. That is
the solution for our energy price for the party of 1 percent: supersize
the price of a gallon of gasoline and let Big Oil get fat on the
profits.
Their idea of energy independence is to dig deeper into your wallet.
Democrats believe it is time to govern for the 99 percent of Americans
that the Republicans have simply forgotten. It is time to stop Big Oil
from cooking its books and frying the American people in the process.
It is time we supersize renewable resources like wind and solar. It is
time energy independence became a national policy, not a national
advertising campaign by Big Oil paid for by the American people.
We can start now. We can pass this motion to instruct. We need to
restore rational fiscal policy. The $5 billion would give us some money
to do some of that and not endorse reckless financial tax holidays for
Big Oil.
When Republicans talk about shared sacrifice, they have to prove they
mean more than offering up the American people on the altar of
corporate greed.
I urge all my colleagues to support the Larson motion. Just because
the Democrats have the right policy on this issue does not mean the
Republicans have to vote against it. You can vote with us once in a
while. You will not die, nothing terrible will happen to you, and the
American people will win. I urge adoption of this motion.
Mr. SAM JOHNSON of Texas. Mr. Speaker, I yield myself such time as I
may consume.
Last week, my colleague from Washington State submitted for the
Record an article describing a draft economist paper that claims to
find no positive effects from the 2003 dividend and capital gains tax
cut. There is solid evidence to the contrary.
I would like to submit a column from Business Week magazine written
by Robert Barro, an economist at Harvard University and nominee for the
Nobel Prize in Economics. He sums up a paper published in the Quarterly
Journal of Economics by saying the 2003 tax cuts enhanced incentives
for work effort, saving and investment. The paper shows that tax policy
can have substantial and rapid effects on economic behavior.
{time} 1915
I submit for the Record a list of seven academic papers that offer
support that a dividend tax cut of 2003 had a positive effect on
capital markets and the economy. These papers were written by a diverse
group of prominent academic economists from such institutions as the
University of California at Berkeley, the University of Michigan, the
University of Illinois and the Federal Reserve Board, and they directly
contradict the papers submitted by my colleagues across the aisle, that
the dividend tax cut had no effect. In fact, according to the IRS,
dividend income by taxpayers went up 22 percent in the year after the
tax cut, and qualified dividend income went up 30 percent.
[From Business Week, Jan. 24, 2005]
How Tax Reform Drives Growth and Investment
(By Robert J. Barro)
Not since 1986, during President Ronald Reagan's second
term, has the atmosphere in Washington been so promising for
basic income-tax reform. Proposals are likely to include
making permanent the tax changes of 2001 and 2003, flattening
the tax-rate structure, and moving toward taxing consumption
[[Page H2069]]
rather than income. The 2003 law gave a taste of what is to
come by advancing the effective date for the 2001 marginal
tax-rate cuts and by reducing rates on dividends and capital
gains. The 2003 tax cuts enhanced incentives for work effort,
saving, and investment. So I think it is no accident that the
U.S. has enjoyed rapid growth rates in gross domestic
product, investment, and productivity since early 2003.
Employment also grew, albeit with a lag.
Because the sharp cut in dividend taxation was a
centerpiece of the 2003 law, it is particularly interesting
to see how companies' dividend policies changed. The
anecdotal evidence suggests a strong positive response,
highlighted by Microsoft Corp.'s initiation of a regular
dividend in 2003. Other large companies that started regular
dividends in 2003-04 include Analog Devices, Best Buy, Clear
Channel Communications, Costco, Guidant, Qualcomm, and
Viacom.
A broader picture comes from the recent National Bureau of
Economic Research working paper, ``Dividend Taxes and
Corporate Behavior: Evidence from the 2003 Dividend Tax
Cut,'' by Raj Chetty and Emmanuel Saez, economics professors
at the University of California at Berkeley. The Chetty-Saez
study analyzes dividends paid by the universe of publicly
listed corporations from the first quarter 1982 through the
second quarter 2004. The sample, designed for statistical
reasons to include the same number of companies in each
period, comprises roughly the 4,000 largest companies by
market capitalization in each quarter.
The study documents a surge in initiations of dividends
after the dividend tax cut was proposed in January, 2003, and
enacted in May, 2003. The percentage of companies in the
sample that paid dividends increased from 20% in fourth
quarter 2002 to 25% in second quarter 2004. This increased
propensity to pay dividends reversed a long-term decline.
The 2003 reform was also followed by increases in payouts
by dividend-paying companies. In the Chetty-Saez sample, the
number of companies that raised regular dividends by at least
20% rose from 19 per quarter in the period before the tax
reform was implemented to 50 in the post-reform period.
Another response was a surge in special, one-time
dividends. This number rose from 7 per quarter pre-reform
to 18 post-reform. The most celebrated special dividend
was Microsoft's payout of $32 billion, announced in July,
2004.
The post-reform increases in dividends--new dividends,
larger dividends, and special dividends--still apply when
Chetty and Saez control for profits, assets, market
capitalization, and cash holdings. In other words, the tax
reform made companies more likely to pay a dividend and to
pay a larger dividend.
In addition, dividend initiations did not increase among
companies for which the largest institutional investor was a
pension fund or other entity not affected by the tax change.
Neither did dividend initiations rise for Canadian companies,
which are not affected by U.S. tax changes.
The study also revealed the relationship between the
concentration of company ownership and the propensity to pay
dividends. After the reforms, dividend initiations were more
likely if share ownership was heavily concentrated among
executives or taxable institutions. The desire of these
players to have larger dividends when the tax rate falls is
particularly likely to be translated into corporate dividend
policy.
There's also evidence that the tax cut particularly
heightened the propensity to pay dividends among companies
with low forecasted earnings growth. So tax reform may have
efficiently taken cash out of companies with below-average
prospective returns on investment.
The dividend study shows that tax policy can have
substantial and rapid effects on economic behavior. The data
highlight the importance of the current deliberations on tax
reform. The Bush Administration should seize the moment and
deliver a tax system that promotes economic growth.
The following seven academic papers offer evidence of the
positive impact of the 2003 tax relief:
Hassett (AEI), Auberbach (UC Berkeley), The 2003 Tax Cut
and the Value of the Firm: An Event Study, NBER Working Paper
No. 11449, July 2005, <a href='http://elsa.berkeley.edu/users/
auerbach/03divtax.pdf'>http://elsa.berkeley.edu/users/
auerbach/03divtax.pdf</a>.
Chetty (UC Berkeley), Rosenberg (UC Berkeley), Saez (UC
Berkeley), The Effects of Taxes on Market Responses to
Dividend Announcements and Payments: What Can We Learn From
the 2003 Dividend Tax Cut?, NBER Working Paper No. 11452,
July 2005, http://papers.nber.org/papers/w11452.pdf.
Chetty (UC Berkeley), Saez (UC Berkeley), Dividend Taxes
and Corporate Behavior: Evidence from the 2003 Dividend Tax
Cut, Quarterly Journal of Economics, Vol. 120 issue 3, August
2005, <a href='http://elsa.berkeley.edu/saez/chetty-
saezOJE05dividends.pdf'>http://elsa.berkeley.edu/saez/chetty-
saezOJE05dividends.pdf</a>.
Chetty (UC Berkeley), Saez (UC Berkeley), The Effect of the
2003 Dividend Tax Cut on Corporate Behavior: Interpreting the
Evidence, American Economic Review (forthcoming), Papers and
Proceedings, Vol 92, issue 2, January 2006, <a href='http://
elsa.berkelev.edu/saez/chetty-saezAEA06.pdf'>http://
elsa.berkelev.edu/saez/chetty-saezAEA06.pdf</a>.
Brown (University of Illinois at Urbana-Champaign), Liang
(Federal Reserve Board), Weisbenner (University of Illinois
at Urbana-Champaign), Executive Financial Incentives and
Payout Policy: Firm Responses to the 2003 Dividend Tax Cut,
Presented at 2006 Boston American Finance Association
meeting, http://papers.nber.org/papers/w11002.pdf.
Richard Kopcke (Federal Reserve Bank of Boston), The
Taxation of Equity, Dividends, and Stock Prices, Federal
Reserve Bank of Boston Public Policy Discussion Paper No. 05-
1, January 2005 <a href='http://www.bos.frb.org/economic/ppdp/2005/
ppdp051.pdf'>http://www.bos.frb.org/economic/ppdp/2005/
ppdp051.pdf</a>.
House (University of Michigan) and Shapiro (University of
Michigan), Phased in Tax Cuts and Economic Activity, NBER
Working Paper No. 10415, April 2004, <a href='http://papers.nber.org/
papers/wl0415.pdf'>http://papers.nber.org/
papers/wl0415.pdf</a>.
Selected quotations from outside. independent academic
papers offering evidence of the positive impact of the 2003
tax relief:
``The immediate tax rate cuts under the 2003 law provided
incentives for production and investment to rise
substantially . . . These incentives likely contributed to
the stronger economic performance in late 2003.''--
Christopher House, Matthew Shapiro, ``Phased-In Tax Cuts and
Economic Activity,'' NBER Working Paper 10415.
``We find strong evidence that the 2003 change in the
dividend tax law had a significant impact on equity
markets.''--Alan Auerbach (DC Berkeley) and Kevin Hassett
(AEI), ``The Dividend Tax Cut and the Value of the Firm: An
Event Study,'' NBER Working paper 11449, July 2005.
``An unusually large number of firms initiated or increased
regular dividend payments in the year after the (2003 tax)
reform. As a result, the number of firms paying dividends
began to increase in 2003 after a continuous decline for more
than two decades.''--Raj Chetty and Emmanuel Saez (UC
Berkeley), ``Dividend Taxes and Corporate Behavior, Evidence
for the 2003 Dividend Tax Cut,'' Quarterly Journal of
Economics, August 2005.
``Fiscal policy along with monetary policy was an important
factor in helping to restart the economic engine in this
latest episode.''--Federal Reserve Chairman Ben Bernanke,
Testimony before the Joint Economic Committee, April 27,
2006.
Mr. Speaker, I reserve the balance of my time.
Mr. LARSON of Connecticut. Mr. Speaker, I yield 3 minutes to the
gentleman from Missouri (Mr. Carnahan), whose State leads this Nation
in ethanol production and certainly understands the importance of the
need for energy and the need for us to roll back these costs.
Mr. CARNAHAN. Mr. Speaker, Republican policies continue in this
Congress to favor the wealthy over middle-income Americans and without
regard to the budget deficit that is expected this year to reach $370
billion.
In the Senate late last year, they had the good sense, common sense
to block extension of special tax cuts. The argument was that they
should not be extending these cuts to benefit the wealthy while our
lawmakers were advancing a broad budget-cutting bill that mainly
targeted programs for the poor such as Medicaid and welfare.
Our ranking Democrat on the Senate Budget Committee said, ``You talk
about completely detached from reality. That's this place.''
Well, Mr. Speaker, on Tuesday, the AP reported that the average cost
of unleaded gasoline was $2.92, up 35 cents from a month ago. Moreover,
U.S. drivers are now paying about 14 percent more to fill their tanks
than a year ago.
The energy bill passed by this Congress last year was a multibillion
dollar giveaway to big oil companies. It picked the pockets of the
American people and helped line the pockets of Big Oil. Those taxpayer
funded special breaks for Big Oil could have much better been used for
funding alternative fuels and getting us weaned off our dependence on
foreign fossil fuels.
Despite the failure of this policy, the Republican tax bill gives
even more to the big oil companies. It is time we stopped subsidizing
the big oil companies who have made not just record profits but the
biggest profits in the history of the world. This is why I rise in
strong support of the motion to instruct, and I commend my colleague,
Mr. Larson from Connecticut, for offering it.
This motion would make three very important changes to close tax
loopholes that are lining the pockets of Big Oil. First, it would
eliminate accounting gimmicks that allow Big Oil to artificially
inflate costs and reduce profits, thus reducing their tax liability,
and continue on this course of record profits at the American public's
expense.
Second, it would close the loophole that gives oil companies a tax
break for taxes they pay for doing business in foreign countries.
And finally, the motion also eliminates the tax break for
accelerating depreciation for oil companies that was given to them in
the energy bill.
[[Page H2070]]
The Larson motion would eliminate a 2-year amortization treatment for
certain expenditures, treatment that is wholly inconsistent with the
way this type of expenditure would be treated by other businesses. It
is not fair to other American businesses, Mr. Speaker. Even the Bush
administration has acknowledged this is excessive.
It is time we end the Republican policy of giveaways to Big Oil, and
I urge my colleagues to support the Larson motion.
Mr. SAM JOHNSON of Texas. Mr. Speaker, I continue to reserve the
balance of my time.
Mr. LARSON of Connecticut. Mr. Speaker, I yield 6 minutes to the
distinguished gentleman from Michigan (Mr. Stupak), who has put forward
legislation of his own and is here to speak and address this issue as
he so often does and articulates it with such conscience and with such
articulation.
Mr. STUPAK. Mr. Speaker, I rise in strong support of the Larson
motion to instruct conferees on H.R. 4297. The motion to instruct
conferees is to adapt the three Senate provisions affecting large
integrated oil companies and would raise over $5 billion in additional
revenue over 10 years.
Basically, what the Larson motion is doing is saying the same thing
the President has said, once oil gets over $40 a barrel. Right now it
is at $73 a barrel; why do we have to continue to give oil companies,
big gas companies more tax breaks?
Look at these record profits. 2005: this is just ExxonMobil. It was
like $36 billion, the most ever by a U.S. company. The whole industry
in the last year was over $110 billion. But yet the policy of this
country is, give them more tax breaks.
We have Mr. Higgins from New York who has the bill to say, take away
the tax breaks. Take away those subsidies. If you are making this kind
of money, why do you have to gouge us again? It is bad enough you gouge
us at the pump. Now you are going to gouge us on April 15 and every day
we pay taxes, and you are not paying any, with those record profits.
Or take Mr. Markey's legislation. You know, when they drill for oil
and gas on Federal lands, you are supposed to pay a royalty. But they
get suspended. They can't even pay a reasonable royalty to the American
people for drilling on the lands you properly own. Why can't we have
the Markey bill before this House? Why can't we have the Higgins bill
before this House? Because we will cut into these record profits, that
is why. Because the American people are with the Democrats on the issue
in support of the Larson motion to take away these tax subsidies for
the richest companies in the world.
Or how about the bill that we have been talking about for the last
couple of weeks now, which is the PUMP Act that we have introduced,
which is, prevent unfair manipulating of prices. Look, these old
futures, as these prices go up, how do they get up there? How did we go
from $40 a barrel to $73 or $75 a barrel? Through speculation, through
greed and through fear.
So we start speculating on the price of oil, add a little fear, like
we have lately. That is called Iran because they might suspend oil
supplies, so that is going to have to bring it up, and then we can get
more profit out of it.
Underneath the PUMP Act, what we are saying is, and currently, under
current situation, only 25 percent of the oil futures are traded under
NYNEX, the New York Mercantile Exchange. That means 75 percent are
traded off-market. OTC they call them, over-the-counter.
All the experts tell us if we would only regulate the trading of oil
futures through the Commodity Future Trade Commission, we could cut the
price of a barrel of oil by $20. That would be one-third off at the
pump. That would be like 90 cents off a gallon of gas if we could just
regulate it.
If it is good enough for 25 percent of the oil traders to be
regulated under the Commodities Future Trade Commission, why can't we
do all of them? Just a fair question.
That is our legislation. Democrats came up with that one. Again, we
can't bring it to the floor. Look, price gouging, that is what we have
been getting right here. And here today we passed the so-called price
gouging bill, the Wilson bill. I even voted for it, as weak a bill it
was on price gouging. And it is at least a start. The Republicans
acknowledge that there is gouging going on, so at least they brought a
bill today; that was a start. But we want to improve it.
Why do we have to improve the Wilson price gouging bill that was
passed by the House today? Just take a look at it. If you are going to
start getting at the cost of energy, you have to start from the ground
all the way to the gas pump. We know that, during September 2004 to
September 2005, the cost of refining a gallon of gasoline went up 255
percent. That is price gouging. Of course, the Wilson legislation
doesn't take that into consideration.
The Wilson legislation, the so-called price gouging legislation,
doesn't consider natural gas, doesn't consider propane.
See what happens here with the Republican Party and the special
interests; only special interests are given freeness. We don't tax oil
companies. We don't tax gas companies. We don't include all types of
energy in price gouging, even if it does go up 255 percent in 1 year.
That is not price gouging. Let's give them a break.
Look, people are tired of being gouged at the pump or when they heat
their homes. I have been for 8 months trying to bring up a reasonable
piece of legislation on price gouging. It takes in all forms of energy
from the ground to the pump.
We had the PUMP legislation, which will actually cut $20 off a barrel
of oil. Why can't we do that? Why can't we take away the tax subsidies?
Why can't they pay a royalty when they drill on Federal lands? Why are
we protecting these record profits that you see right here? I think the
American people know.
So I have been on this for the last 8 months. I am on the Energy and
Commerce Committee. I have written to the chairman to have a hearing on
my bill, because this winter, the Escanaba Senior Center got their
bill. $7,000; next month it was over $13,000. Their energy assistance,
LIHEAP, Low-Income Heating Energy Assistance Program, only gives $6,000
a year. They used it all up in 1 month.
And after they get done gouging us at the gas pump, they will be
gouging us this winter as we heat our homes. Therefore, let's use
common sense. Let's give something back to the American people who are
being gouged at the pump, at the thermostat and every day by these oil
and gas companies.
Pass the Larson motion. It is the least we can do to try to bring
some sanity back to this industry which is totally out of control and
being protected by the Republican majority.
Mr. SAM JOHNSON of Texas. Mr. Speaker, can I ask the gentleman, how
many more speakers do you have?
Mr. LARSON of Connecticut. I don't believe we have any more speakers.
I believe I have the right to close. I will reserve that right, and the
gentleman can proceed.
Mr. SAM JOHNSON of Texas. Mr. Speaker, I yield myself such time as I
may consume.
You can talk about price gouging all day, but it costs money to get
oil out of the ground and get it delivered, and we have an excellent
delivery system. And that oil doesn't come from just this country,
because some of my friends over there have blocked us from drilling for
oil or gas in the major parts of our country.
I think that another provision that our Democrat friends propose in
their effort to repeal the law of supply and demand by reducing foreign
tax credits, they are proposing to increase the capital cost of
American oil companies when drilling in other countries. And they think
this will somehow reduce the cost of oil.
Well, if you are scratching your head and wondering how increasing
capital costs will then somehow be able to reduce the cost of a final
product, join me in voting against this motion. This motion simply
doesn't make sense.
The Democrat proposal to take away foreign tax credits when American
oil companies are drilling in far off places like Africa, South America
or Central Europe, the last time I looked, that is where a lot of oil
is. Yet the part of the Democrat motion on the foreign tax credit does
increase the cost of drilling in those countries.
Perhaps our Democrat friends would rather have China National
Offshore
[[Page H2071]]
Oil Company or Venezuelan companies winning these drilling contracts
rather than American companies. I can assure you that the president of
China National Offshore Oil Company and Hugo Chavez in Venezuela really
don't care about the cost of a gallon of gasoline in suburban America.
To handicap American oil companies when drilling offshore would be to
disadvantage American oil companies in these global drilling contracts
and will ultimately harm Americans at the pump.
Again, Mr. Speaker, our friends on the other side of the aisle are
aiming to repeal the law of supply and demand. Just like they can't
repeal the laws of physics and have pigs fly, they can't repeal the law
of supply and demand in the oil market. We should defeat this motion to
instruct conferees.
Mr. Speaker, I yield back the balance of my time.
Mr. LARSON of Connecticut. Mr. Speaker, I yield myself such time as I
may consume.
And to my distinguished colleague from Texas, apparently, pigs have
taken flight in the United States Senate because the Republican-
controlled Senate has sponsored this very straightforward legislation
that calls for these rollbacks.
And no one less than the President of the United States, and I will
reiterate again, said ``record oil prices and large cash flows also
mean that Congress has got to understand that these energy companies
don't need unnecessary tax breaks.''
{time} 1930
``I am looking forward to Congress to take about $2 billion of these
tax breaks out of the budget over the next 10-year period. Cash flows
are up. Taxpayers do not need to be paying for certain of these
expenses on behalf of energy companies,'' the President of the United
States.
But, you know, the real test here, I like to call it the Augie &
Ray's test. Augie & Ray's is a little diner in my hometown of East
Hartford. I go there frequently, and I have an opportunity to meet with
people that are baffled by what is going on here in the United States
Congress but surely astounded by the greed that exists in corporate
America, especially as it relates to energy prices.
These are people, regular people, in the Northeast who have seen
their moneys cut for low energy assistance to heat their homes. These
are people that are paying huge prices at the gas pump that is chewing
up all of the profits that a small businessman makes, and they are
wondering aloud what the United States Congress is going to do about
it. So the President of the United States, a Republican, and the
Republican-controlled Senate call for this rollback that is modest at
best; and yet our colleagues on the other side of the aisle persist in
saying, oh, no, this is much-needed relief for oil companies that
receive tax cuts on top of record-breaking profits, while we cut
assistance to the poor.
People that have to make a decision between the food that they eat,
heating and cooling their homes, and the prescription drugs that their
doctors tell them to take want relief from their government. We have
already made them refugees from their own health care system by sending
them to Canada to get the kind of prices on their prescription drugs
that they can afford, and now we are squeezing the middle class
throughout the Northeast and senior citizens who have nowhere else to
turn.
This is a modest, modest proposal that Mr. McDermott submitted last
week and I submit this week, that the Republican-controlled Senate has
already passed.
We implore you to embrace this straightforward rollback in a time
when oil companies and their executives have made unprecedented profits
so that we can provide basic relief to American citizens. I implore my
colleagues to vote for this motion.
Mr. LEVIN. Mr. Speaker, I rise in strong support of the motion by
Representative Larson that calls for rolling back $5.4 billion in
unjustified tax subsidies and loopholes for the oil industry. The
Senate has voted to close these loopholes, and the House should do the
same. We are here to represent the interests of American consumers, not
the interests of the oil companies.
The average U.S. price for self-serve regular gas is $2.91 a gallon,
or nearly 70 cents higher than it was at this time last year. This is
the average cost. In many areas, the price of a gallon of gas is much
higher. Some of this is due to higher oil prices and strong demand for
petroleum, but some of the price hikes we are seeing simply cannot be
explained away by supply and demand.
At the same time that consumers are facing pain at the pump, the oil
companies are raking in record profits. Last week, the world's largest
oil company, Exxon Mobil Corp., announced first-quarter profits of $8.4
billion, up 7 percent from a year ago. This gave Exxon the fifth-
highest quarterly profits ever recorded by a publicly-traded company.
Marathon Oil's profits more than doubled in the first quarter to $784
million. ConocoPhillips, the Nation's third-largest oil and gas
producer, reported last week that its first quarter profit rose 13
percent. All told, the country's three largest U.S. petroleum companies
posted combined first-quarter income of almost $16 billion, an increase
of 17 percent from the year before.
Further, Exxon Mobil recently was able to give its former CEO one of
the most generous retirement packages in history: nearly $400 million,
including pension, stock options and other perks. The people I
represent simply do not understand how the energy companies can keep
posting sky-high profits, award $400 million golden parachutes to their
executives, and keep raising the price of gasoline.
The very least Congress can do is to close some of the unjustified
loopholes in the tax code that unfairly benefit big oil companies.
Americans are watching what we are doing here. I am sure they noticed a
plan floated by Senate Republicans last Friday to give consumers a $100
rebate check, paid for by a tax change on oil company inventory
accounting. For most people, that would come out to about two or three
tanks of gas. Consumers want us to fix the problem, not buy them off
with a $100 check. But what's interesting here is how the proponents of
the rebate plan quickly shelved their proposal just a few days later
after oil companies waged an intense lobbying effort to block the
closure of the inventory accounting loophole. This speaks volumes about
who the Republican leaders of Congress listen to.
The motion before the House would roll back $5.4 billion over 10
years in tax subsidies and loopholes for the oil industry. That comes
out to about $135 million a quarter, which comes out to be about 1.6
percent of Exxon's first-quarter earnings in 2006.
So there is a clear choice before the House today. We can stand with
consumers who are struggling with these sky-high gas prices, or we can
stand with the oil companies that are posting some of the highest
profits in the history of the world.
The SPEAKER pro tempore. Without objection, the previous question is
ordered on the motion to instruct.
There was no objection.
The SPEAKER pro tempore. The question is on the motion to instruct
offered by the gentleman from Connecticut (Mr. Larson).
The question was taken; and the Speaker pro tempore announced that
the noes appeared to have it.
Mr. LARSON of Connecticut. Mr. Speaker, on that I demand the yeas and
nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX, further
proceedings on this question will be postponed.
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