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Dems' Oil Subsidy Bill is Unconstitutional

May 17, 2011 - by Donny Shaw

Senate Republicans may be using a faulty argument about gas prices going up if we end oil subsidies as an excuse for protecting some of their biggest corporate donors, but Democrats don’t seem to be taking the issue much more seriously. By bringing up a bill to end subsidies and effectively increase the corporate tax rate on U.S. oil companies, they’re only setting up a campaign talking point, not doing actual policy work. The bill is flat-out unconstitutional, and they know it.

TPM:

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.”

He and most of the Dem caucus couldn’t be happier that their Republican counterparts are circling their wagons around big oil companies to protect their multi-billion dollar annual tax subsidies. And they’ll have great fodder for attack ads starting Tuesday night, when a Senate bill that would rescind those subsidies is expected to fail along party lines.

Article 1, Section 7 of the U.S. Constitution: “All bills for raising Revenue shall originate in the House of Representatives.”

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Comments

jsimsnewchapter 05/17/2011 4:38pm

This bill doesn’t technically raise revenues. It rescinds a government spending.
Definition:
A subsidy (also known as a subvention) is a form of financial assistance paid to a business or economic sector.

So they are NOT taking in money; they are reducing pay outs.

JSeverson 05/18/2011 9:35am

Here’s the thing though: oil companies aren’t receiving subsidies. They are receiving tax breaks.

“They are tax breaks. Of the $4 billion in alleged subsidies to Big Oil, $1.7 billion derives from a domestic manufacturing tax deduction intended to keep factories in the U.S. It is available to every company, not just oil companies. Another $850 million comes from another tax provision, also available to every U.S. corporation, that gives a credit for taxes paid to foreign countries—just as you can deduct your state taxes from your federal income taxes. Yet another $1 billion comes from tax rules that let oil companies treat oil in the ground as capital equipment for write-down purposes, and the rest comes from rules that let oil companies write off certain business costs immediately.”

http://reason.com/archives/2011/05/17/the-difference-between-a-tax-b

jlohman 05/18/2011 8:48am

So we are faced with a real tough decision… save the subsidies that all taxpayers pay for, or eliminate the subsidies so gas prices go up and only vehicle drivers pay the price. Duh, this is a real tough dilemma. But I’d sure like that our politicians are not taking campaign contributions (bribes) from the oil industry while they make this decision.

Jack Lohman
http://MoneyedPoliticians.net

zegota 05/17/2011 4:55pm

I agree with jsimsnewchapter. I don’t believe ending a subsidy is the same as raising revenue. Regardless, an argument could be made either way.

The headline kind of pissed me off. Even the most egregious laws aren’t “Unconstitutional” until a judge declares it so, which obviously hasn’t happened in this case. The whole thing is moot because the House is unlikely to bring up the oil subsidy bill for a vote, let alone pass it. But a simple “may be” added to this headline is probably in order.

Naame 05/18/2011 1:35pm

I agree with jsimsnewchapter. Regardless of how one feels about the oil subsidies, cutting or reducing them is a spending cut. It is not increasing revenue.

That would be like saying that a family who chooses to go out dinner once per month instead of twice is making a choice which increases their income revenue. That is obviously false. That family isn’t making more money. They are just saving/spending their money in a different manner.

Mahlalie 05/17/2011 5:47pm

It’s not a subsidy. It’s primarily a tax break for manufacturers. It doesn’t pay the companies. It allows the, to pay less in taxes. Ending the break is synonymous with raising taxes.

valleri 05/18/2011 6:56am

It is ironic though how the talk of ending tax breaks for oil companies correlates with the current downward trend in gas prices. Just yesterday gasoline dropped .12 a gallon and was dropping before that.

Regardless, oil companies answer to shareholders. If tax breaks are ended, the consumer will likely pay more in the long term to cover their losses. That’s how our free market works. The only way to prevent that is to nationalize oil, which I suspect has nil support from most anyone.

kaluk8 05/24/2011 8:25am

This simile is not right. Congress does not work and earn money, like families do. It raises money by levying taxes. To generate more revenue, Congress raises taxes. Ending a subisidy is raising taxes, since the net result is increasing revenues for the federal government. To argue otherwise is partisan semantics.

If the Republicans introduced legislation to do away with the mortgage tax credit, requiring millions of home owners to pay hundreds of millions in additional taxes per year, would you be on here defending their right to simply end a subsidy? You’d be on here yelling at those tax-hiking SOBs.

If you’re not willing to see things without a partisan lens, you’re not contributing intelligently to the problems of this country.

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