Senate Republicans defeat oil windfall tax measure

WASHINGTON -- Saved by Senate Republicans, big oil companies dodged an attempt Tuesday to slap them with a windfall profits tax and take away billions of dollars in tax breaks in response to the record gasoline prices that have the nation fuming.

GOP senators shoved aside the Democratic proposal, arguing that punishing Big Oil won't do a thing to lower the $4-a-gallon-price of gasoline that is sending economic waves across the country. High prices at the pump are threatening everything from summer vacations to Meals on Wheels deliveries.

The Democratic energy package would have imposed a 25 percent tax on any "unreasonable" profits of the five largest U.S. oil companies, which together made $36 billion during the first three months of the year.

It also would have given the government more power to address oil market speculation, opened the way for antitrust actions against countries belonging to the OPEC oil cartel, and made energy price gouging a federal crime.

"Americans are furious about what's going on," declared Sen. Byron Dorgan, D-N.D. He said they want Congress to do something about oil company profits and the "orgy of speculation" on oil markets.

But Republican leaders said the Democrats' plan would do harm rather than good, and they kept the legislation from being brought up for debate and amendments.

On world markets, oil prices retreated a bit Tuesday but remained above $131 a barrel. Gasoline prices edged even higher to a nationwide record average of $4.04 a gallon.

At the Capitol, Democratic leaders needed 60 votes and they got only 51 senators' support, including seven Republicans who bucked their party leaders. Sen. Mary Landrieu of Louisiana, a state tied closely to the oil industry, was the only Democrat opposing the bill.

Sen. Harry Reid, D-Nev., supported the windfall profits tax. Sen. John Ensign, R-Nev., voted against it.

Ensign believes taxing oil companies "is just the wrong direction," spokesman Tory Mazzola said.

"When you tax something, you get less of it," Mazzola said. "That's a basic fact of supply and demand."

Reid, the Senate majority leader, said the bill was "responsible legislation."

"We end the billions of dollars in tax breaks for big oil companies whose executives have been hauling record profits while we pay record prices," he said.

Reid voted in favor of the measure, but for procedural reasons changed his vote to "no" so that he could bring it up again.

"We are hurting as a country. We're hurting individually as Americans ... and the other side says, 'Do nothing. Don't even debate the issue,' " complained Sen. Charles Schumer, D-N.Y.

"Average citizens are scratching their heads and saying, what's wrong with Washington," said Schumer.

GOP opponents argued that little was to be gained by imposing new taxes on the five U.S. oil giants: Exxon Mobil Corp., Chevron Corp., Shell Oil Co., BP America Inc. and ConocoPhillips Co.

While these companies may be huge, they don't set world oil prices and raising their taxes would discourage domestic oil production, the Republicans said of the Democrats' plan.

"In the middle of what some are calling the biggest energy shock in a generation ... they proposed as a solution, of all things, a windfall profits tax," Republican leader Mitch McConnell of Kentucky chided the Democrats. He called their proposal "a gimmick" that would not lower gasoline prices and only hold back domestic oil production.

"The American people are clamoring for relief at the pump," agreed Sen. Pete Domenici, R-N.M., but "they will get exactly what they don't want" under the Democrats' plan: higher prices and an increase in oil imports.

The bill's supporters argued that their proposal was different from the windfall profits taxes of the early 1980s that thwarted domestic production and led to a rise in imports. The oil companies could avoid the tax by using their "windfall" to push alternative energy programs or refinery expansions, they said.

Shortly after the oil tax vote, Republicans blocked a second proposal that would extend tax breaks that have either expired or are scheduled to end this year for wind, solar and other alternative energy development, and for the promotion of energy efficiency and conservation.

Again Democrats couldn't get the 60 votes to overcome a GOP filibuster.

Reid voted for the bill, which would also renew the tax write-off for state and local sales taxes, a benefit aimed at Nevada and a handful of other states that do not tax income.

Ensign voted against the bill, saying the benefit of the tax breaks would be offset by the new taxes the bill would create.

He said he backs a competing bill that offers the extended tax breaks for sales taxes and for solar, wind and geothermal energy but does not raise other taxes to pay for them.

Ensign said he also voted against the bill to protest a "billion-dollar tax earmark" for New York City, and another provision that would grant trial lawyers a deduction for upfront expenses "even though they expect to recover them when they win or settle."

Reid said the bill would give Republicans a chance "to invest in renewable energy rather than line the pockets of Big Oil billionaires," but they voted against it.

"And we gave them the chance to create millions of good-paying green-collar jobs right here at home to combat a Bush-McCain economy that has lost jobs every month of 2008," Reid said, adding, but "they just don't get it."

Neither Republican presidential candidate John McCain nor his Democratic rival, Barack Obama, were in Washington to cast votes on the energy issue on Tuesday.

Obama, in a statement, said Republicans had "turned a blind eye to the plight of America's working families" by refusing to take up the energy legislation. Obama has supported additional taxes on the oil companies.

Stephens Washington Bureau Chief Steve Tetreault contributed to this report.