Obama quietly drops windfall tax proposal
By David Ivanovich
December 3, 2008
President-elect Barack Obama has quietly shelved a proposal to slap oil and natural gas companies with a new windfall profits tax.
An aide for the transition team acknowledged the policy shift Tuesday, after a small-business group discovered the proposal — touted throughout much of the campaign — had been dropped from the incoming administration’s Web site.
“President-elect Obama announced the policy during the campaign because oil prices were above $80 per barrel,” the aide said. “They are below that now and expected to stay below that.”
Indeed, the price of crude has fallen $100 a barrel since its record close of $145.29 on the New York Mercantile Exchange July 3. Obama had long called for using the proceeds from the proposed new tax to give American consumers an “emergency energy rebate” worth up to $500 per individual or $1,000 per married couple.
Asked whether the energy rebate plan had likewise been put on hold, the transition aide said the rebates were included in a middle class “rescue plan” Obama released in mid-October. That plan calls for a permanent tax cut of $500 for a worker or $1,000 for a family.
From $3.96 to $1.66
American motorists, however, now don’t have to reach as deeply in their pockets to fill up their tanks as they did just five months ago.
On Tuesday, regular was selling for an average $1.66 a gallon in Houston, down from a record $3.96 in July, according to AAA’s Daily Fuel Gauge Report.
The oil industry has been fighting vigorously to ward off a new windfall profits tax.
The American Petroleum Institute, a Washington-based oil industry trade group, argues a windfall profits tax enacted in 1980 cost the industry $38 billion in revenue and the nation as much as 1.3 billion barrels of domestically produced oil, as industry players moved activity overseas to avoid the tax.
“No president who wants to be successful should start with a policy that history has proved to have failed,” said Kevin Book, an oil and energy policy with FBR Capital Markets.
“I think this is a positive sign about the administration being a clear-thinking one. They recognized that refining and oil extraction jobs are still U.S. jobs.”
Book argues, however, that the oil industry shouldn’t become complacent. He calculates various tax proposals likely to come up in the new Congress could cost the industry $28 billion to $35 billion over the next 10 years.
Removed from site
The change in the Obama camp’s thinking came to light when officials at the Petaluma, Calif.-based American Small Business League noticed the windfall profits tax language had been removed from the transition team’s Web site, www.change.gov, in what the group called “an unceremonious and abrupt manner.”
League President Lloyd Chapman said the Obama camp also has dropped a reference to concern that federal contracts designated for small businesses were being awarded to major corporations instead — a key issue for Chapman’s group.
League officials question whether the omission of attention to that matter and the disappearance of the windfall tax proposal indicate that the incoming administration is already being unduly influenced by large corporations.
But industry officials hailed the move away from the windfall tax.
“Certainly, the judgment to withdraw the concept of a windfall profits tax is an important recognition that developing America’s oil and natural gas would be seriously damaged by such a tax policy,” said Lee Fuller, vice president of government relations for the Independent Petroleum Association of America.
Thomas Pyle, president of the free-market oriented Institute for Energy Research, said in a prepared statement: “The president-elect’s decision to reverse course on imposing this Carter-era burden on those who explore for and produce American energy is a heartening development — both for consumers and an economy struggling to claw its way out of a recession.”