Democrats in the House and Senate are renewing their push for higher taxes on oil companies to attack what they say are "windfall" profits due to "price gouging," just days after President Biden accused oil giants of making "outrageous" profits in an inflationary environment.
"You may have noticed that Big Oil just reported record profits," Biden said in his State of the Union address last week. "Last year, they made $200 billion in the midst of a global energy crisis. It’s outrageous."
Congressional Democrats responded this week by proposing the Big Oil Windfall Profits Tax Act, which would impose new taxes on the biggest oil companies and send that money directly to taxpayers.
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"Big Oil’s obscene profits last year are the spoils of war and cartel pricing," said Sen. Sheldon Whitehouse, D-R.I., the Senate sponsor of the bill. "Clawing back Big Oil’s windfall and returning it to the American families who paid for it at the pump is good policy that will help deter future price gouging."
"Congress should heed the president’s call, ignore the fossil fuel industry’s lies, and deliver this needed relief for the American people," he said.
Whitehouse and Rep. Ro Khanna, D-Calif., the House sponsor of the bill, say the five largest publicly traded oil companies earned more than $260 billion in profits in the last fiscal year, at a time when gas prices hit $5 a gallon and more across the country.
Biden said last week that these companies didn’t use those profits to expand production, and instead used it to "buy back their own stock, rewarding their CEOs and shareholders."
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Under their bill, oil companies that produce at least 300,000 barrels of oil per day will be hit with a quarterly tax that equals 50% of the difference between current oil prices and the average price per barrel between 2015 and 2019. This so-called "clawback" tax would apply to oil profits beginning last year.
Money raised from the tax would be sent on a quarterly basis to taxpayers who earn more than $75,000 annually as an individual, or families earning $150,000.
The lawmakers estimate that with current prices between $90 and $100 a barrel, their bill would impose about $48 billion in additional taxes on the biggest oil companies, and return about $255 each year to individual tax filers, and $382 each year to families.
While Democrats have accused oil companies of "gouging" during the recent period of high inflation, oil companies have rejected those accusations and say they have been "proven false."
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The American Exploration and Production Council, which represents the largest oil and gas exploration and production companies in America, argues that oil prices are set in the global market, not by any one company.
"The reality is that American oil and gas producers simply do not – and cannot – price gouge," the group said last year. "The largest non-state-owned oil company in the world (ExxonMobil) only has around 2% of the world’s oil reserves and production."
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The group also said the Federal Trade Commission has studied the issue several times and concluded the rising prices are caused by market factors, "not illegal behavior from oil companies."
Democrats proposed similar legislation last year when their party controlled the House and the Senate, but it went nowhere.
