It turns out that while the US has been facing record budget deficits, Iraq has been doing pretty well. US auditors have predicted a budget surplus of $80 billion in Iraq: 94% of that revenue comes from oil.
It’s not surprising. Oil revenues are at their highest point in years while the costs to Iraq are fairly small: the US is, of course, paying the costs of the infrastructure and other countries have forgiven the Iraqi debt. Good news for the wealthiest Iraqis, perhaps, but bad news for our Congressional officials. US taxpayers are understandably ticked off about the latest news – especially as oil prices in this country remain high.
Senator Carl Levin (D-MI), the Chair of the Senate Armed Services Committee, shares this outrage:
We should not be paying for Iraqi projects while Iraqi oil revenues continue to pile up in the bank, including outrageous profits from $4-a-gallon gas prices in the US. We should require that U.S. taxpayers be reimbursed for the cost of large projects.
A nice thought, but it won’t happen. In fact, I predict the opposite: US tax dollars will continue to pour into Baghdad despite the fact that Iraq has shown a surplus for the last four years.
And how much of that is due to US taxpayers? Not counting costs directly associated with the military, taxpayers have paid $48 billion in reconstruction costs since 2003 invasion of Iraq. Approximately half of those costs were spent on the oil and electricity industries, water systems and security. Iraq ponied up a scant $3.9 billion for those costs, despite Bush’s pre-war assurances that Iraqi oil money would pay for reconstruction. In fact, in 2003, then-Deputy Secretary of Defense Paul Wolfowitz told Congress: “We’re dealing with a country that can really finance its own reconstruction, and relatively soon.”
Hmm. Really?
Defying the White House, Representatives in the US House voted to prevent about 22 million taxpayers from being hit by the alternative minimum tax (AMT).
What?
Oh yeah, just like with any headline, there’s more.
The idea of AMT relief was originally endorsed by the GOP (such as Senator McCain). The problem with AMT relief? The $61 billion hole in the budget left behind.
To offset the hole, Deomocrats propose to raise revenue in three key areas:
1, The bill would tax the “carried interest” of private equity and hedge fund managers at ordinary income tax rates instead of the 15% capital gains rate;
2, The bill would close a loophole that Democrats say has allowed foreign-owned US firms to avoid taxes on payments to foreign parent companies as a result of tax treaty provisions; and
3, The bill would bar integrated oil companies from claiming a domestic manufacturing tax deduction and would freeze the benefit for smaller oil and gas companies. Integrated oil companies are those involved in the upstream (i.e., exploration and production) and downstream (i.e., refining, marketing, distribution and retailing) segments of the industry. Prior to 2004, oil companies were not entitled to this deduction which was estimated to cost $3.5 billion over 5 years.
House Ways and Means Committee Chair Charles Rangel (D-NY) claims that the offsets are necessary in order to prevent the deficit from getting bigger: “We’ll be able to say we didn’t borrow the money and we didn’t put this burden on our children and grandchildren.”
But the GOP and the White House see it differently, calling the offsets a “permanent tax increase.”
With the offsets in place, the bill likely won’t pass the Senate. If it does, the White House has threatened a veto.
I think we all agree that AMT relief needs to happen in some form – and not as a series of last minute patches. The question is whether there should be an accompanying revenue offset: what do you think?
Senate Republicans blocked a proposal today that would tax the windfall profits of the country’s largest oil companies. The GOP put together 43 votes, which left the Democrats 9 votes short of what they needed to break a filibuster and bring the proposal to a vote.
Democrats had urged Congress to pass the bill, with Sen. Byron Dorgan (Dem – ND) claiming, “Americans are furious about what’s going on.” But the GOP wouldn’t budge, claiming that the bill was not the answer to the current energy problems which are leaving taxpayers shelling out more than $4/gallon.
The bill would have imposed a 25% tax on profits considered “unreasonable” compared to profits several years ago. An exemption would have been available to oil companies that invested profits in alternative energy projects or refinery expansion. The bill also would have rescinded oil company tax breaks granted under the Bush administration — worth about $17 billion over the next 10 years.
GOP Senators opposed the plan, saying that increasing domestic production is the answer, not taxation. Republicans leaders instead hope to revive a plan, which was voted down last month, to allow oil drilling in the Arctic National Wildlife Refuge in Alaska and in state coastal waters.
I’ll agree that increased taxes are not always the answer. But I do find it amazing that oil companies are among those getting tax breaks at a time when taxpayers are hurting at the pump. Of course, you and I both know that rather than take a hit in their own bulging pockets, Big Oil would simply pass along that tax to consumers.
Sigh. I have no answers. Do you?
(Image: Newscom)
On Wednesday, Congress will consider rolling back nearly $18 billion in tax breaks for large oil companies pushed through in 2005. The White House has already voiced its intention to veto such a bill if it passes.
Democrats are hopeful that the bill will pass. Last year, a similar bill languished in the Senate when the GOP opposed it. However, as the price of oil continues to climb, sentiments may be changing.
The revenues from the repeal of the breaks from the oil companies – almost $18 billion over 10 years – would be used for tax incentives for wind, solar and other renewable energy sources.
Big oil, in a second year of record breaking profits, has been busy lobbying against the bill in Congress. Clearly, they’ve already won over the White House.
What do you think? Should Big Oil pay up? Or should we stick to the original cuts?
