Obama deficit plan includes repeal of US oil and gas tax breaks
Washington (Platts)--19Sep2011/1236 pm EDT/1636 GMT
US President Barack Obama on Monday introduced a wide-ranging proposal to
save the federal government $3 trillion over the next 10 years by cutting
spending and raising taxes, including the repeal of a number of tax subsidies
for the oil and gas industry.
"We've got one of the highest corporate tax rates in the world, but it's
riddled with exceptions and special interest loopholes. So some companies get
out of paying a lot of taxes, while the rest of them end up having to foot the
bill," Obama said from the White House Rose Garden Monday morning. "That has
Obama sent a detailed proposal to the so-called "super committee" on
deficit reduction, a bipartisan, 12-member joint committee made up of
senators and representatives, who are aiming by Thanksgiving to cut $1.5
trillion from the federal deficit over 10 years.
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Obama's proposal would cut more than $3 trillion over that same time
period, including $580 billion in spending cuts, $1.1 trillion by drawing
down troops from Iraq and Afghanistan, and $1.5 trillion from tax reform.
The bulk of that tax reform raises $1.28 trillion in revenue by allowing
tax cuts to the wealthy individuals to expire. But an additional $300 billion
would come from eliminating a number of tax breaks, including those to the
oil and gas industry.
Among them is the repeal of the "last in, first out" accounting method
for valuing inventory, which the administration says would be worth $52
billion for 10 years.
In addition, the Obama plan estimates an increase of $41 billion in
revenue over 10 years by eliminating a number of tax credits and deductions
for the oil and gas industry. These include eliminating the depletion
allowance for oil and gas wells; repealing the use of the domestic
manufacturing deduction for oil and gas production; eliminating the use of
deductions for intangible drilling costs; and eliminating the use of a
deduction for "any tertiary injectant used as part of a tertiary recovery
COAL INDUSTRY TARGETED TOO
Also, the plan would stop oil and gas companies from taking an exception
to passive loss limitations, and require a two-year amortization of the
geological and geophysical expenditures of independent oil and gas producers,
instead of the current seven-year amortization.
The Obama plan also proposes saving $66 million by requiring oil and gas
companies pay drilling permit fees to the Bureau of Land Management. The
industry could also be hit with a 9.7-cent/barrel excise tax on crude oil and
imported petroleum products, to fund cleanup of hazardous waste sites under
the Superfund program.
Republicans, who have been opposed to any tax increases, have said that
tax breaks to the oil and gas industry could be considered along with other
tax reform, but not on its own.
Senate Majority Leader Mitch McConnell, however, blasted Obama's overall
"Veto threats, a massive tax hike, phantom savings, and punting on
entitlement reform is not a recipe for economic or job growth -- or even
meaningful deficit reduction," McConnell said in a statement.
Representative Fred Upton, a Michigan Republican who sits on the super
committee, has said that revenue should be raised through expanded oil and
gas development, rather than tax increases.
Even before his speech, Obama's proposal drew fire from Republican
presidential hopeful Mitt Romney, who said the plan would have a "crushing
impact on economic growth."
"President Obama's plan to raise taxes will have a crushing impact on
economic growth. Higher taxes mean fewer jobs -- it's that simple. This is yet
another indication that President Obama has no clue how to bring our economy
back," Romney said in a statement.
Obama also promised a veto to any bill that made cuts to Medicare, which
some have called for, without raising "revenues by asking the wealthiest
Americans or biggest corporations to pay their fair share."
The Obama plan would also target tax breaks to the coal industry, which
the administration estimates could mean an additional $2 billion to federal
coffers over 10 years.
--Derek Sands, firstname.lastname@example.org