Senate blocks Big Oil windfall profits tax bill

Senate Republicans today voted to block an energy bill that would have imposed a windfall profits tax and ended $17 billion in tax breaks for oil companies.

At a time of record high gasoline prices, the issue of which party is doing the most to ease the impact on American families is eclipsing all other issues as a top political concern. Lawmakers on both sides of the aisle say they expect such high-profile votes on the issue to continue until the fall election.

"Today, Republicans will have a simple choice: Will they continue to stand with [President] Bush, [Vice President] Cheney, and the modern-day oil barons? Or will they join us on the side of struggling American families who deserve better?" Senate majority leader Harry Reid said before the Tuesday morning vote.

Since Mr. Bush came to office in 2001, gasoline prices have more than doubled and oil companies have made more than half a trillion dollars in profits, Democrats say.

The proposed Consumer-First Energy Act would create a 25 percent windfall profits tax on companies that don't invest in renewable fuels or electricity production. It also would zero out some $17 billion in tax breaks for the oil industry and use the revenue to help consumers by investing in an Energy Independence and Security Trust Fund. The bill aims to curb speculation by hiking up margin requirements for those investing in futures trades and banning traders from using offshore futures markets to evade regulation.

On Tuesday, Bush threatened to veto the bill: An increase in taxes on energy will likely reduce supply and increase energy costs, he said. It's "exactly the opposite of what the Congress should be doing at a time when consumers are already burdened with record high energy prices," he said in a statement issued by the Office of Management and Budget.

In response, Democrats say soaring oil industry profits – and CEO salaries – are sparking so much resentment among Americans that Republicans will be forced to abandon their positions.

Tuesday's vote was 51 to 43, short of the 60 Democrats needed to break a filibuster. Six Republicans and nearly all Democrats supported moving the bill to the floor of the Senate. GOP Sens. Norm Coleman of Minnesota, Susan Collins and Olympia Snowe of Maine, Charles Grassley of Iowa, Gordon Smith of Oregon, and John Warner of Virginia broke with their caucus to vote for the bill. Sen. Mary Landrieu (D) of Louisiana was the lone Democrat to oppose it.

"In an election year with an absolutely infuriated public, maybe we can get enough votes to override [a presidential veto]," says Sen. Carl Levin (D) of Michigan.

Senate Republicans say the solution to America's energy crisis must include more investment in domestic sources of energy, including expanding US refinery capacity, opening the continental shelf and the Arctic National Wildlife Refuge to exploration and drilling, and jump-starting the nation's nuclear power industry.

What the Democrats have produced is a "No Energy" bill, says Sen. Kay Bailey Hutchison (R) of Texas. "They get a bill that does not produce one ounce of energy," she said on the Senate floor Tuesday.

But some GOP moderates worry that members of their party are looking like obstructionists on issues at the top of voters' concerns. "It's absolutely imperative that we demonstrate to the American people that we understand the enormous anxiety, not to mention despair, that they are experiencing given the exorbitant increases in energy prices, both on the oil front and gasoline and diesel," said Senator Snowe after the vote.