Lawmakers Calling for Windfall Profits Tax on Oil Companies
With gas prices at the pumps averaging $3 a gallon around the country, lawmakers in state capitols and Washington, are questioning high profits in the oil industry and are considering imposing windfall profits taxes on oil companies. Pennsylvania Governor Ed Rendell, in a letter to the President, asked Bush to work with Congress to pass a windfall oil profits tax and direct the money back to consumers and businesses that are being hurt by the rise in gas prices, the Pittsburgh Business Times reports.
|Low Cost Accounting Software Support
Provider of low cost support, consulting, training and custom report writing for MAS 90, MAS 200 and MAS 500 accounting software systems. Call us toll free at 1-866-762-3990 to learn how we can help. http://www.saveonsupport.com
“Not only are gas prices spiking, across regions of my state it’s getting harder to find gas,” Rendell said in his letter. “Consumers and business are trying to find ways to cope, but gasoline prices keep rising,” Rendell told the Business Times. “The president needs to act now. Oil companies should not be permitted to drain Americans’ bank accounts to collect record-breaking profits.”
On Tuesday the President announced that he was temporarily halting deposits to the nation’s Strategic Petroleum Reserve and asked Congress to rollback $2 billion in tax breaks for oil companies over the next 10 years for items such as write-offs for some research and development for deep water drilling, CNN reports.
The administration, on Tuesday, also sent letters to the states attorneys general, asking them to focus on potentially illegal prices increases, the Associated Press reports. “Consumers around the nation have expressed concerns about what they have perceived as anticompetitive or otherwise unfair conduct by the world’s major oil companies,” Attorney General Alberto Gonzales and Federal Trade Commission Chairman Deborah Platt Majoras said in their letter.
California’s Revenue and Taxation Committee has approved a bill to tax California oil producers’ windfall profits. The bill would levy a 2 percent tax on oil company income of more than $10 million, the San Jose Mercury News says. Governor Arnold Schwarzenegger, who has not taken a position on the proposal, has asked the California Energy Commission to investigate price increases, and report back if they find evidence of market manipulation, price gouging or other unfair practices.
Senator Arlen Specter of Pennsylvania, chairman of the Senate Judiciary Committee, and several Democratic senators said in weekend interviews that the government should consider a tax on oil companies if they make excessive profits when gasoline prices are rising sharply.
Specter is concerned about market concentration in the oil industry. “I believe that we have allowed too many companies to get together to reduce competition,” he said, according to boston.com. “They get together, reduce the supply of oil, and that drives up prices. In the short run, it’s hard to deal with it for tomorrow. But I think windfall profits, eliminating the antitrust exemption . . . are all items we ought to be addressing.”
The nation’s largest oil companies, including Exxon Mobil Corp., have denied the charge that size has influenced prices, boston.com says. Oil companies will be reporting their first quarter earning this week.
Alaska’s Senate has approved a “rewrite” of the state’s oil production tax that would increase the effective tax rate on oil produced in the state from 14.5 percent to 20.7 percent, the Houston Chronicle reports. The new tax would bring approximately $2.5 billion more per year to Alaska each year from 2007 to 2016, legislative consultant Econ One says.
An agreement, reached by Governor Frank Murkowski and three major oil companies who will be involved in the construction of the North Slope natural-gas pipeline, is based on the 14.5 percent effective tax rate. Industry is insisting that a net-profits tax be locked in for 30 years and inserted into the still confidential pipeline contract to provide fiscal stability, the Chronicle reports.
Brian Wenzel, ConocoPhillips’ vice president of finance and planning, said, according to the Chronicle, that the senate’s rewrite brings an onerous tax burden to industry that could affect future development.
Voice of the Editor
Which isn’t completely true. I mean, occasionally I drop by when I manage to sneak out of the nonstop frat party over at Going Concern, but I’m mostly a wallflower over there. I’m happy to say that I’ve been given express permission (or explicit orders, if you like) to wander over here to AccountingWEB more often.
Why is that, you might ask? My job is to replace the irreplaceable Gail Perry as Editor-in-Chief. What does that mean? I don’t really know! I think it’ll be fun getting a feel for things, throwing in my own thoughts here and there, and listening to the discussions you’re having about the accounting profession.