Rising oil prices have gotten Congress to consider legislation that could significantly impact corporate accounting and individual taxpayers, but at last report both of those areas look like they will go untouched.
Senate Republicans recently withdrew a proposal that would bar businesses from using last in, first out (LIFO) accounting for inventories, while leaders from both parties in the Senate and the House are relinquishing hopes for a proposed $100 federal rebate for taxpayers to offset the higher costs of gasoline, according to several news reports from Washington.
Republican leaders decided to scrap the proposed elimination of LIFO accounting after listening to howls of protest from the business community in public hearings, according to the Houston Chronicle’s Washington bureau. However, the Senate Finance Committee has agreed to hold public hearings into LIFO accounting sometime later this year.
Since LIFO lets companies involved with commodities use current prices to determine their costs of goods sold, changing the rule would seriously impact those dealing with rapidly rising crude oil prices, with some experts reportedly predicting that it would cause the five largest oil companies to pay an additional $4.3 billion in federal taxes over the next two years. Rex Tillerson, chief executive of oil giant Exxon Mobil, led the business community’s argument that the proposed LIFO change amounts to “a backdoor windfall profits tax” on his industry.
While LIFO reform may be revisited, Senate Majority Leader Bill Frist, a Republican, and the Senate Democratic Leader Harry Reid of Nevada, have each declared the $100 taxpayer rebate proposal “dead”, according to the Bloomberg news service. House Majority Leader John Boehner, an Ohio Republican, seconded that assessment and called the rebate proposal “insulting” to consumers, but U.S. Sen. Rick Santorum, a Pennsylvania Republican, countered that the rebate remains an option that would be funded by repealing tax incentives for oil companies.
That news report also quotes Christine Tezak, of the Stanford Washington Research Group political think tank, saying, “The good policy response is to do nothing, but you can’t do that as a policymaker if your constituency is screaming,” Gas prices exceeding $3 a gallon in some markets may merit screaming.
The undertones of the Congressional debate include Democrats seeking to capitalize on voter anger by connecting oil company political donations to Republican-backed energy policies that have included tax incentives for oil exploration that were in last year’s energy bill. The Democrats' House Leader Nancy Pelosi of California has said, "Instead of the record prices for gas and record profits for Big Oil, we could already have had laws on the books against gouging and excess profits. But the Republican energy policy has been about massive subsidies for oil companies already making historic and obscene profits, and nothing for the American consumer.”
One of the less politically contentious reforms being considered would require the Federal Trade Commission to come up with a definition of "price gouging," and would impose criminal and civil penalties of up to $150 million for refiners and wholesalers and $2 million for retailers that engage in gouging in fuel markets.