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Obama goads Congress to end tax breaks for large oil companies

Olivier Knox, Yahoo News
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President Barack Obama on Thursday pressed Congress to repeal billions of dollars in tax breaks for oil companies that are pulling down record profits, arguing that Americans hit with soaring gas prices should not also have to prop up firms that can easily "stand on their own."

"It's like hitting the American people twice. You're already paying a premium at the pump right now. And on top of that, Congress up until this point has thought it's a good idea to send billions more of your tax dollars to the oil industry," Obama said in the White House Rose Garden.

[Related: 'There is no justification' for high prices]

"It's not like these are companies that can't stand on their own. Last year, the three biggest U.S. oil companies took home more than $80 billion in profit. Exxon pocketed nearly $4.7 million every hour. And when the price of oil goes up, prices at the pump go up, and so do these companies' profits," Obama said.

The president's remarks came as the Senate, in a procedural vote, beat back a measure that would have rolled back the tax breaks. The bill fell shy of the 60 votes needed to advance, getting a 51-47 margin that saw Democrats join Republicans in opposition.

High gas prices pose a potentially serious election-year threat to Obama, threatening the fragile economic recovery and hitting Americans in the wallet. Experts blame the pain at the pump on soaring demand in fast-growing economies like China, India and Brazil, as well as instability and uncertainty in the Middle East. But public opinion polls show Americans disapprove of the president's handling of the issue.

Obama's remarks showcased two of the main themes of his re-election campaign: Running against Congress and staking out a populist economic stance.

There is little a president can do over the short term to lower gas prices, but Republicans have seized on the issue to assail Obama's energy policies. House Republicans on Thursday struck a preemptive blow at the White House, circulating a March 2011 report by the nonpartisan Congressional Research Service suggesting that the president's proposals could actually result in higher gas prices and a greater reliance on imports.

The proposed repeal "would increase tax collections from the oil and natural gas industries and may have the effect of decreasing exploration, development and production, while increasing prices and increasing the nation's foreign oil dependence. These same proposals, from an alternate point of view, might be considered to be the elimination of tax preferences that have favored the oil and natural gas industries over other energy sources and made oil and gas products artificially inexpensive, with consumer costs held below the true cost of consumption, when the external costs associated with environmental costs and energy dependence, among other effects, are included," the CRS said.

"The Administration estimates that the tax changes outlined in the budget proposal would provide $22.8 billion in revenues over the period 2012 to 2016, and over $43.6 billion from 2012 to 2021. These changes, if enacted by Congress, also would reduce the tax advantage enjoyed by independent oil and natural gas companies over the major oil companies. On what would likely be a small scale, the proposals also would make oil and natural gas more expensive for U.S. consumers and likely increase foreign dependence," according to the report.

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"Whichever view is adopted, the real effects of these proposals on oil and natural gas production, consumption, and import are likely to be small relative to both the federal deficit and the revenues of the oil and natural gas industries," CRS concluded.

Republican Senate Minority Leader Mitch McConnell mocked what he derisively referred to as the Democratic majority's "brilliant plan on how to deal with gas prices: raise taxes on energy companies, when gas is already hovering around $4 a gallon. Then block consideration of anything else—just to make sure gas prices don't go anywhere but up."

"Somehow they thought that doing this would set up some kind of a political win for them, which I never really understood," he added. "I mean, I can't imagine anybody giving them any high-fives for not lowering the price of gas. But anyway, that was the plan."

Correction, 12:07 p.m.: Correcting to change "subsidies" to "tax breaks."

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