Reid: Hey, let’s just tax the hell out of certain oil companies; Update: Bill unconstitutional?

posted at 4:54 pm on May 17, 2011 by Jazz Shaw

There’s a bevy of not-so-goodness to be found in a bill which Harry Reid plans to float as a trial balloon in the Senate this week. S940 is also known as the Close Big Oil Tax Loopholes Act. Other names previously considered for the bill included, but were not limited to:

  • “Winning Some Easy Votes by Screwing American Energy Producers and Driving Up Costs to Consumers Act of 2011.”
  • “Making It More Expensive to Produce the Energy We Told You We Were Tired of Importing from Overseas Act of 2011.”
  • “Taxing the Living Hell Out of Five of the Few Companies Who Could Actually Create More Jobs This Year if We Woke Up and Gave Them Permits Act of 2011.”

The number of things wrong in this hastily assembled piece of legislation is almost too great to cover in one article. There is also reason to believe that it’s just more political theater on the part of Harry Reid, since one key Democrat already confessed that it probably doesn’t have the legs to make it past the Senate, say nothing of the House. But just in case it does, here are a few of the lowlights you need to be aware of. All of these provisions are aimed directly or through legal definitions at five companies: Exxon, Shell, BP, ConocoPhillips and Chevron.

First, the bill contains language regarding the purpose of jacking up taxes on certain energy producers to ostensibly lower the deficit. (And hey, who doesn’t want to do that, right?) Hot Air was contacted by the American Petroleum Institute on this score. Don’t buy it.

Summary: Sec. 301 of “The Close Big Oil Tax Loopholes Act” (S. 940) claims that any revenues generated by the bill’s tax increases on certain oil and gas companies would be put towards deficit reduction. Sec. 301 does not mandate deficit reduction. Any net revenue increase in this bill would enhance a bank of savings on OMB’s S-PAYGO scorecard, which future legislation could use to “pay for” unoffset new spending.

Explanation: S. 940 would impose higher taxes on certain oil and gas companies. Although an official JCT score is not yet public, the bill would unambiguously generate additional revenue. Sponsors of the legislation have included language stating that any net savings produced by the legislation would go towards deficit reduction:

And here are a few of the other real winners to be found in the bill currently under consideration.

TITLE I SEC. 102. LIMITATION ON SECTION 199 DEDUCTION ATTRIBUTABLE TO OIL, NATURAL GAS, OR PRIMARY PRODUCTS THEREOF.

As we covered in our previous article on so-called “subsidies” for Big Oil, virtually every US company engaged in “manufacturing, producing, growing or extracting” anything in this country is eligible for a 9% tax deduction for those productive efforts. Until now, the major integrated oil producers were already getting a reduced reduction of 6%, a restriction not imposed on any other productive, job creating activity. This section will drop that number to zero. No deduction for those five companies.

TITLE II SEC. 201. REPEAL OF OUTER CONTINENTAL SHELF DEEP WATER AND DEEP GAS ROYALTY RELIEF.

Sections of the Energy Policy Act of 2005 allowed the government to waive certain costs against royalties for energy producers engaged in the expensive and frequently hazardous for workers environments of deep water leases to encourage expanded domestic production. This section will eliminate that option and make sure every attempt to find more resources gets slammed with the maximum bill due to Uncle Sam.

TITLE I SEC. 104. LIMITATION ON PERCENTAGE DEPLETION ALLOWANCE FOR OIL AND GAS WELLS.

(a) In General- Section 613A of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

`(f) Application With Respect to Major Integrated Oil Companies- In the case of any taxable year in which the taxpayer is a major integrated oil company (as defined in section 167(h)(5)(B)), the allowance for percentage depletion shall be zero.’.

I include this section primarily for laugh factor value. While preparing this article, I put in a call to two tax attorneys for the American Petroleum Institute who were really scratching their heads over this one. The percentage depletion allowance is a cost recovery method that allows taxpayers to recover their lease investment in a mineral interest through a percentage of gross income from a well. It’s available to private developers, “wildcatters” and the like. Taking it away from the large integrated companies in question doesn’t seem like it’s going to put much more money on the nation’s coffers as those five companies haven’t been eligible for this benefit for more than 20 years.

This just goes to show how well thought out this bill was when it got rushed to the floor. Simply amazing. But here’s a bonus for you. Guess what major American company is getting pretty much all of the same tax benefits which Harry Reid now wishes to strip from energy producers but will not have their “subsidies” taken away? The New York Times.

UPDATE: My prediction that this bill was ill prepared and nothing more than political theater seems to be confirmed by, of all sources, TPM. The entire thing probably couldn’t be passed even if they had the votes.

Republicans may have a point that Democrats are playing politics with oil subsidies. To understand why, look no further than the fact that the bill Senate Majority Leader Harry Reid will bring to the floor for a vote Tuesday evening doesn’t pass basic constitutional muster.

“The question is if the bill passes the Senate, it will run into a blue-slip problem,” Reid said at his weekly Capitol press conference. Blue slipping is the process the House uses to reject Senate bills that impact tax and spending.

Reid joked, “That’s the least of my worries.” …

But even if by some miracle it passes, it would have to be shelved. In their zeal to put Republicans on the spot, Democrats neglected one key technicality: eliminating tax loopholes raises revenues, and any legislation that raises revenues must, according to the Constitution, originate in the House of Representatives.

Really? That’s the least of your worries? Can somebody in the sound booth give me a quick check on the feed here? Did the Senate Majority Leader really just say that whether or not his legislation is even constitutional is the “least of his worries?”

Your tax dollars at work, yet again.

This post was promoted from GreenRoom to HotAir.com.
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It looks like a bill of attainder, even if it originates in the house.

Vashta.Nerada on May 17, 2011 at 4:58 PM

Apparently $7 dollar gas (this summer) is not good enough for Reid.

“Tax certain big oil companies” is code word for ‘invincible taxes for everybody’. You just know Congresscritters won’t be affected by it.

Sir Napsalot on May 17, 2011 at 4:58 PM

“My friends on the right don’t like to hear this, but the Constitution is not a clear document. Written 100 years ago, when America had thirteen states and very different problems, it rarely speaks directly to the questions we ask it.” –Ezra Klein, 12-30-2010

Abby Adams on May 17, 2011 at 4:58 PM

The Senate leadership continues to prove the theory that it was a good thing that the ‘pubs didn’t take control. Thank you, Harry Reid, for continually proving what a schmuck you are.

See you in 2012.

ornery_independent on May 17, 2011 at 4:59 PM

I wonder when was the last time Dingy Harry bought a tank of gas and paid for it himself.

hillbillyjim on May 17, 2011 at 4:59 PM

And how exactly does raising the cost of producing oil lower gas prices? Apparently Reid never heard of the phrase “we’ll pass that cost along to the costumer.”

Fred 2 on May 17, 2011 at 4:59 PM

Executive Order in 5…..4….3….

Or maybe just some EPA/Cass Sunstein new regs and fees can do the same thing?

DIRTY LITTLE SECRET…….companies just pass along new fees and taxes to………..US (the consumers). We are so stupid.

PappyD61 on May 17, 2011 at 5:02 PM

Political theater in underrated by the Stupid Party.

The Dems are masters of the genre and it has paid dividends.

rickyricardo on May 17, 2011 at 5:05 PM

Explanation: S. 940 would impose higher taxes on certain oil and gas companies.

Maximum fail. Look Harry, I know you have shyte between your ears, so I’ll explain it in simple words.

Companies pass taxes you create directly TO ME, GOT THAT?

Also you already tax the daylights out of every gallon of gas that is sold, you greedy twerp!

dogsoldier on May 17, 2011 at 5:11 PM

Political theater in underrated by the Stupid Party.

The Dems are masters of the genre and it has paid dividends.

rickyricardo on May 17, 2011 at 5:05 PM

It’s amazing what liar’s have in common.

heshtesh on May 17, 2011 at 5:11 PM

“My friends on the right don’t like to hear this, but the Constitution is not a clear document. Written 100 years ago, when America had thirteen states and very different problems, it rarely speaks directly to the questions we ask it.” –Ezra Klein, 12-30-2010

the Founders were pretty savvy when it came to overt government and I’m certain there isn’t a single issue today that they wouldn’t have a far more preferable deduction than what we get now

Sonosam on May 17, 2011 at 5:12 PM

Did the Senate Majority Leader really just say that whether or not his legislation is even constitutional is the “least of his worries?”

Well, yes. Why not? The head of the NationalSocialist Democrat Party, President Obeyme, isn’t the least bit concerned with violating the Constitution. The Won decided if he doesn’t like a law, he can simply order his Attorney General not to enforce the law. The law is what The Supreme Ruler wants it to be. I commend Senator Reid’s honesty, a high-ranking Democrat has finally admitted that his Party isn’t at all concerned with laws. Only power matters to these people. And half of the voters think that’s a GOOD thing.

U.S.A.

R.I.P.

oldleprechaun on May 17, 2011 at 5:12 PM

Can we please look into having Congress in session biennially? Why are they constantly passing all this reactionary legislation? Seriously… stupid.

Fallon on May 17, 2011 at 5:12 PM

Definition of a “bill of attainder:”

(1) a legislative act
(2) a particular or easily defined group or individual
(3) a punishment or taking (‘taking’ is a term of art here)
(4) a lack of judicial trial

I know Reid couldn’t care less about the Constitution, in addition to the “originate in the House” bit, but there’s really no wiggle room on this one.

Meric1837 on May 17, 2011 at 5:14 PM

They are truly shooting for $7-8 per gallon gas. I guess it makes sense….then right before the election Obama can make some speeches about issuing permits and allowing more drilling…gas then comes down to $5-6 and everybody is amazed at his stunning intelligence voting him in.

Then it won’t matter beyond that. US will be toast. Obama will be president for life!

Ditkaca on May 17, 2011 at 5:16 PM

Count It!

Del Dolemonte on May 17, 2011 at 5:16 PM

Bbbbut bbbbbbut bbbbbut

COMMERCE CLAUSE!!!!

– crr6

angryed on May 17, 2011 at 5:17 PM

Paging Mr. Orwell, stat, Mr. Orwell please report to the Senate Leader’s offices. You are needed in reference to the outdated term revenue raising.

txmomof6 on May 17, 2011 at 5:22 PM

Hey Harry! Las Vegas just shuttered the doors on the legendary Sahara casino!

Instead of wasting your time with a bill that isn’t going to go anywhere, why don’t you go use all that precious time of yours to go turn the Sahara into a museum devoted to honoring The Wonder That Is You!

At least with you occupying your time with that “noble” endeavor, the rest of us won’t have to worry about hearing from your sorry a$$ for awhile!

pilamaye on May 17, 2011 at 5:23 PM

So the Dems can rationalize floating ridiculous bills as trial balloons, but when I expect John Boehner and Allen West to live up to their campaign promises and say what they’re going to do, it’s a “waste of time” because it won’t get past the goddam senate?!

/facepalm

gryphon202 on May 17, 2011 at 5:23 PM

I was in Marin County during lunch today. I needed to get some gas and the only gas station I found was a Shell. Regular at $4.59 a gallon. We cannot drill fast enough for me.

PrettyD_Vicious on May 17, 2011 at 5:25 PM

Nice and edgy Jazz! Love it. With senators like Reid, who needs lubrication? Err….I mean oil….

JohnnyMojo on May 17, 2011 at 5:28 PM

Thanks a lot Nevada.

Denverslim on May 17, 2011 at 5:32 PM

Companies pass taxes you create directly TO ME, GOT THAT?

dogsoldier on May 17, 2011 at 5:11 PM

They know that. They don’t care.

davidk on May 17, 2011 at 5:33 PM

They say “Commerce Clause”; I say “equal protection.” Even if interstate commerce is the overt justification, all parties to an interstate business transaction deserve equal treatment under the law. Even the commerce clause doesn’t say that Congress gets to punish winners just for winning.

College Prof on May 17, 2011 at 5:34 PM

His worries consist strictly of campaign ads.

Cindy Munford on May 17, 2011 at 5:38 PM

It’s almost as if these politicians don’t pay for their own gas…

… Oh, wait!

Seven Percent Solution on May 17, 2011 at 5:41 PM

another 5 years of this schmuck….

ugh

cmsinaz on May 17, 2011 at 5:42 PM

Did the Senate Majority Leader really just say that whether or not his legislation is even constitutional is the “least of his worries?”

That’s nothing new. Nancy Pelosi laughed at the same question and asked “Are you kidding?”

That’s how Democrats roll, babies.

I’m thinking there are a lot of otherwise respectable Democrats who must be concerned by what the progressives have done to the reputation of the Democrat paryt.

Come on, folks – take your party back from these thugs.

disa on May 17, 2011 at 5:44 PM

It’s almost as if these politicians don’t pay for their own gas…

… Oh, wait!

Seven Percent Solution on May 17, 2011 at 5:41 PM

Yahtzee!

hillbillyjim on May 17, 2011 at 5:49 PM

By my calculations, Texas can easily support 1/3 of the US population. What say we build that moat with ‘gators around the state, secede and form JohnGaltistan! We have the drillers, the resources, the nuclear power and land for farms.

UkiddenMe on May 17, 2011 at 5:54 PM

I work for one of the biggest. Not THE biggest, but big enough to have stations across the 57 states. On the way home my local convenience store stop brought me face to face with another regular, some old prune with Air America still tattooed on her forehead. She spotted me and told me that ‘X’ is going to be investigated for price fixing (X being my employeer). Best laugh I had all day. Now I know where she got the information…..Dkos & his kids.

Limerick on May 17, 2011 at 5:55 PM

Limerick on May 17, 2011 at 5:55 PM

Their typical, willful ignorance is going to be our downfall.

Sheep.

hillbillyjim on May 17, 2011 at 5:59 PM

The land of the fee, the home of the craven slave.

FIFY

Random Numbers (Brian Epps) on May 17, 2011 at 6:04 PM

Harry Reid proves the adage that “You can’t fix stupid!”

GarandFan on May 17, 2011 at 6:15 PM

Senate Republicans should abstain from voting on this bill. Let the Democrats have all the glory of voting to kill jobs and raise gas prices, and then have their bill shot down on Constitutional grounds. Reid will look like the fool he is, especially if his own party refuses to pass it.

Socratease on May 17, 2011 at 6:22 PM

Honestly, how difficult is it to comprehend and understand that a tax/fee/mandate on business is ultimately passed unto the consumer??

Cheese and Rice, all ya gotta do is look at your cable/phone/utility bill and see that you, as the consumer, are paying for this crap!

Gothguy on May 17, 2011 at 6:33 PM

Saw Harry Reid’s book in the Dollar Tree store last weekend.

Heh.

Dr. ZhivBlago on May 17, 2011 at 6:34 PM

Not constitutional? When did the dems let that get in the way of raising taxes or anything else they want to do. If all else fails, the judges will just rule it into existence.

Kissmygrits on May 17, 2011 at 7:03 PM

It may not be Constitutional, but it is how Palin balanced her budget in Alaska, so it must be conservative.

petunia on May 17, 2011 at 7:36 PM

and it fails….

cmsinaz on May 17, 2011 at 7:47 PM

Kneecaps in need of attention, stat.

Midas on May 17, 2011 at 8:47 PM

petunia on May 17, 2011 at 7:36 PM

You act like she had a choice. If the state was taking the tax in the name of the people then they should get it, not have it sit in some fund waiting for a lefty to find a use for it.

tinkerthinker on May 17, 2011 at 10:19 PM

That’s the least of your worries?

Well, yes, as he knows the whole purpose of this exercise is to impress the dumb@$$ Obama voter, not to accomplish anything constructive. Leftist, Marxist garbage never intends to accomplish anything constructive.

MNHawk on May 18, 2011 at 7:26 AM

Stunts like Reid’s make me shake my head in total frustration not because of how wrong they are. Sen. Reid wouldn’t try something like this unless he thought he could make political hay out of it and the only reason it works is because a large portion of the citizens of this country actually believe that corporations pay taxes.

How hard is it to understand that corporations don’t pay taxes? They 1) pass the costs onto their customers in the form of higher prices, 2) reduce shareholder (individual, pension funds, IRAs, etc.) dividends, 3) move to a more friendly environment.

RedinPDRM on May 18, 2011 at 9:56 AM

How hard is it to understand that corporations don’t pay taxes? They 1) pass the costs onto their customers in the form of higher prices, 2) reduce shareholder (individual, pension funds, IRAs, etc.) dividends, 3) move to a more friendly environment.

RedinPDRM on May 18, 2011 at 9:56 AM

Look how well it worked for Detroit.

Roy Rogers on May 18, 2011 at 11:08 AM

I’m thinking there are a lot of otherwise respectable Democrats who must be concerned by what the progressives have done to the reputation of the Democrat paryt.

disa on May 17, 2011 at 5:44 PM

You would be wrong.

runawayyyy on May 18, 2011 at 4:46 PM