Senate Republicans have defeated a proposal to charge oil companies a windfall profits tax.

The measure, dubbed the "Consumer First Energy Act," aimed to combat the rapidly rising price of gasoline but needed 60 votes to overcome a threatened filibuster. It only received a 51-43 vote. Senate Majority Leader Harry Reid, D-Nev., changed his vote to no in order to be able to reintroduce the bill later.

"No matter where we live or what our transportation options are, we all deserve a cleaner, safer, more affordable energy future," he said before the vote.

Under the bill, Senate Democrats wanted to repeal the Section 199 deduction for major oil and gas companies, stripping $17 billion worth of tax breaks over the next decade. The bill would also impose a supplemental 25 percent tax on profits over what would be considered "reasonable." The bill would have made price gouging of oil and gas sales a federal crime with penalties as high as $5 million. The Attorney General would be authorized to bring price-fixing charges against countries in the OPEC cartel. The bill also promised to curb speculation in the energy futures market by requiring traders to put up more collateral and stopping them from routing transactions through off-shore markets.

Senate Republicans contended that the windfall profits tax failed to lower gas prices when it was tried in 1980 during the Carter administration. "Democrats will claim that this bill would bring gas prices down," said minority leader Mitch McConnell (pictured), R-Ky. "But in doing so they are counting on Americans to forget a basic law of economics: that raising taxes on those who produce something leads to an increase in the price of the products they sell."

Another bill that stalled in the Senate on the same day would have amended the Tax Code by providing incentives for energy production and conservation, and to extend some expiring tax provisions that encouraged use of renewable energy sources. That measure received a vote of 50-44, 10 votes fewer than necessary to overcome a filibuster.

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access