Oil industry ramps up opposition to ‘vindictive’ slashing of tax breaks

The oil industry ramped up efforts Monday to undercut plans by Democrats to eliminate a slew of tax breaks for the largest oil companies.

The effort comes as Senate Democrats are girding for a floor fight as early as this week on a proposal to slash tax breaks for the five largest oil companies.

{mosads}The American Petroleum Institute (API), the country’s most powerful oil and gas industry trade association, blasted the proposal Monday at an event at the National Press Club.

The Senate proposal is a “vindictive use of the tax code to target one industry over another,” API senior tax adviser Brian Johnson said.

Johnson argued that any proposal to eliminate oil industry tax credits would result in increased costs passed down to consumers.

API was joined at the event by the U.S. Chamber of Commerce chief economist Martin Regalia, who called the proposal to slash the tax breaks a “clear attempt to go after companies that in the current environment have higher profits and therefore look like targets.”

President Obama outlined a proposal to eliminate oil industry tax breaks in his fiscal year 2012 budget request. Buoyed by record oil industry profits and high gas prices, Democrats have revived the proposal in recent weeks.

Last week, House Democrats tried to bring a bill that would eliminate a Section 199 domestic manufacturing deduction for the five largest oil companies. But Republicans blocked a procedural move designed to bring the legislation up for a vote.

The House will continue efforts this week to pass legislation to expand domestic oil and gas production. The chamber passed last week the first of a three-part drilling package fast-tracked by GOP leadership.

Meanwhile, Senate Democrats will continue to hammer away at the tax-breaks issue this week. Legislation targeting the tax breaks could come to the floor this week, but the timing of a final vote on the bill is unclear.

The legislation faces an uphill battle in the Senate. Two similar measures failed in recent months. But Democrats are hoping that high gas prices offer an opportunity to pass the bill.

Senate Finance Committee Chairman Max Baucus (D-Mont.) is calling on oil industry executives to testify at a Thursday hearing on the tax breaks. Baucus is working to put meat on the bones of a proposal to eliminate tax breaks for the largest oil companies.