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THE WALL STREET JOURNAL: White House Backs Oil Firms' Attempt To Avoid New Tax: Friday 18 November 2005
By BRODY MULLINS
Staff Reporter of THE WALL STREET JOURNAL
November 18, 2005; Page A6
WASHINGTON -- The Senate approved a year-end tax bill early Friday after the White House and oil lobby failed to remove a measure that would add billions of dollars to the oil industry's tax bills.
The $70 billion, five-year tax bill would exempt millions of Americans from the alternative minimum tax, offer tax incentives to corporations and provide $7 billion in breaks to promote Gulf Coast reconstruction. The legislation doesn't include a coveted two-year extension of President Bush's 15% rates on capital gains and dividends. Republicans hope to add the lower rates into the bill during final negotiations with the House. The House could bring up similar legislation today.
Taking aim at big oil companies, the Senate bill includes a provision that would raise taxes by an estimated $4.3 billion over two years for companies that both produce and refine oil and gas by changing the way they account for oil supplies, according to the Senate Finance Committee.
The White House said in a statement that it supported the bill, but opposed the new oil-industry taxes and the exclusion of the capital-gains and dividends extension.
Since the provision was unexpectedly added to the tax bill earlier this week, lobbyists for companies such as Exxon Mobil Corp., BP PLC, Chevron Corp., Royal Dutch Shell PLC and ConocoPhillips mounted a campaign in opposition.
The companies rallied their employees to ask senators to oppose the taxes, and instructed lobbyists to generate support for an amendment that will be offered today to water it down. They hoped to prevail using "good old-fashioned lobbying and grass-roots education," said Don Duncan, ConocoPhillips's top Washington lobbyist.
Industry lobbyists told senators that new taxes will discourage companies from drilling for more oil and gas on U.S. land, increasing the country's dependence on foreign oil. During Senate debate, the oil companies were able to trim their new taxes by $700 million to $4.3 billion. They hope to scrap the new taxes entirely in the House, where Republican leaders have vowed to block it.
The oil industry got encouraging news yesterday when senators defeated a string of amendments that would have raised other taxes or gutted existing tax breaks. The Senate defeated, 64-35, legislation offered by Democratic Sen. Byron Dorgan of North Dakota that would have imposed a windfall-profit tax on recent oil-company revenue, which has surged to highs.
"If you start having an excessive profits tax on Big Oil, do you have one on Big Microsoft?" asked Sen. Charles Grassley (R., Iowa), the author of the tax bill, before the Senate vote.
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