The Senate will debate a tax bill that would cut taxes by about $61 billion over the next five years, and would include a $5 billion tax next year for the nation's biggest oil companies.
With the Senate Finance Committee's approval of the bill, the entire Senate is expected to debate the legislation this week.
An extension of President Bush's 2001 tax cuts on stock dividends and capital gains is not included in the bill. Those cuts expire in 2008, and a one-year extension that some Republicans lobbied for would have cost about $11 billion.
Congress last approved a so-called "windfall profits tax," in the 1970s after oil companies saw a spike in profits similar to this year's $30 billion third-quarter profits. At the time, opponents of the measure said that the move discouraged oil production and did little to combat severe gas shortages.
Technically, the provision would require major oil companies to change how they account for oil inventories next year. Currently, if an oil company increases inventories, it can book the increase as a cost against profits and then value the new oil at current market prices. When oil prices rise, companies can increase their costs and reduce their taxable income.
The Senate package would also provide $7.6 billion in tax breaks for areas damaged by Hurricane Katrina and Hurricane Rita, as well as allocate $28 billion to essentially delay the spreading impact of the alternative minimum tax for another year.
In the House, tax writers are working on a bill including a two-year extension of President Bush's tax cut on stock dividends but that does not include any breaks for hurricane recovery or address the AMT. The House bill is estimated to cost about $32 billion over the next five years.
