COLUMBUS (TDB) -- Seventeen Ohio House Democrats
introduced a bill today that is aimed at pumping some of the enormous and unprecedented profits generated by Big Oil into the state's treasury. The money raised would be used to promote fuel efficiency and a greener economy.
It is not exactly a "windfall profits tax," but would use a formula based on 8.5 percent "multiplied by the amount by which the petroleum business's net income for the petroleum business's taxable year exceeds one million dollars." The bill is clearly an attempt to snare cash on the back of record oil prices.
The handful of oil-industry experts The Daily Bellwether was able to reach said they had no idea how much the proposed tax would generate, nor had they seen the bill. One said, "Sh.t, I have no idea how much it would generate, a lot, Ohio would be rolling in dough."
State Rep. Mike Foley, D-Cleveland, is one of the sponsors and has not yet responded to an e-mail seeking comment. Republicans control the House, and not one has signed on as a cosponsor of the bill. That dims its odds of moving forward and becoming law.
[UPDATE: 7/25/07 -- Got an e-mail from Rep. Foley. "Hi Bill, yes it is on big oil. We exempt retail outlets and the 1st million dollars of profit to go after the largest oil refiners and producers. For example, it you took Exxon's worldwide profits in 2006 of 39 Billion, it is estimated that our tax would bring in about 30 million for Ohio. We would then put this into an advanced alternative energy fund for research, product development, rail travel etc.
Quarterly profits for most of the big oil firms will be announced this Thursday and Friday. OUr assumption is that they will again be huge."]
Big Oil has been making money like never before. Last year, Exxon Mobil earned $75,000 a minute, and posted profits of $39.5 billion. That beat 2005's $36.1 billion profit, a short-lived record for the most money ever made by an American business.
Motorists are smarting under $3 a gallon gasoline prices. There are some who want to punish the oil companies for gouging, although the cost of gasoline, when adjusted for inflation, is about what it was 20 or 30 years ago. And the U.S. uses some 21 million barrels of oil each day, nearly a fourth of the world's 84-million-barrel-a-day total.
The Ohio Democrats say the proposed tax will help shift the state to a green economy. The bill says it is "for the purpose of promoting energy-efficient modes of transportation and advanced energy production technology . . " The tax would not apply to companies whose only business is selling petroleum products at retail, which means independent gas stations and the like. The measure also forbids companies from jacking up prices to cover the tax.
Several states have been looking at taxing net income, including Pennsylvania, California and Alaska, which wants to shift taxation from production to profits.
The U.S. had a windfall profit tax on oil companies from 1980 to 1988, which brought in $80 billion. That was way less than the projected $393 billion, in part because oil producers moved offshore and cut domestic production. The Congressional Research Service said the tax actually caused less oil to be pumped from American oilfields.
Last year, the Ohio Oil and Gas Association, which represents the state's producers (yes, Ohio produces oil) opposed moves in Congress restore a windfall profits tax as petroleum prices spiked. "It is important for producers to convey the message that local production matters and taxing the industry would only harm domestic production and increase dependency on foreign oil." The industry argues that taxes take away funds that could be put back into exploration and drilling for oil.
There's more news today about oil industry profits, and the news is likely to spur the efforts to tax Big Oil.