Democratic Leaders Mislead on Gas Prices, Oil Taxes, Says Energy Expert

By Matt Cover | May 17, 2011 | 4:36 PM EDT

Sen. Robert Menendez (D-N.J.) (AP Photo)

( – Democratic leaders in both the House and Senate continue to make misleading statements about the effect their plans to raise taxes on oil companies would have on gas prices.

“We have to do something about the exorbitant gas prices, and the best way to start with that is to do something about the five big oil companies getting subsidies they don't need,” Senate Majority Leader Harry Reid (D-Nev.) said on the Senate floor on Tuesday.

Democratic Congressional Campaign Committee Chairman Rep. Steve Israel (D-N.Y.) was even more direct. Appearing on MSNBC’s Jansing & Co., Israel said that Congress could lower gas prices by eliminating tax write-offs for large oil companies.

“There’s lots of things we can do [to lower gas prices],” Israel said. “We can start by eliminating the $4 billion subsidy that big oil companies get.”

Democratic National Committee Chair Rep. Debbie Wasserman Schultz (D-Fla.) said May 6 on Fox News Channel’s Fox & Friends that the “first step” to bringing down gas prices was to eliminate tax write-offs for oil companies.

“The bottom line is that we are still giving ridiculous, unacceptable subsidies to oil companies and massive tax breaks that even they’ve said they don’t need,” Wasserman Schultz said. “That’s the first step that we need to take to try to bring our energy costs down.”

However, as Institute for Energy Research Senior Vice President Dan Kish told, eliminating tax write-offs for oil companies will not have any effect on gas prices.

“If food prices are going up, would it make sense to tax farmers? Would that make prices go down or up? At the end of the day, basically, what they’re talking about is more un-American energy,” Kish said. “If you make it more expensive in the United States to produce energy, it will be produced somewhere else.”

Senate Democrats, led by Sen. Robert Menendez (D-N.J.) have introduced a bill that would eliminate tax write-offs for the five largest oil companies – ExxonMobil, Conoco-Philips, Chevron, BP America, and Shell – saying it is unfair that these large corporations continue to receive tax breaks when Congress is forced to cut the federal budget in other areas.

Rep. Debbie Wasserman Schulz (D-Fla.) (AP Photo)

Kish pointed out that all five of the targeted oil companies are international corporations, and that the real result of Sen. Menendez’s bill would be to push their business overseas.

“The top five companies are in the distinctly unique position of being international; they have operations all over the world,” said Kish. “When the United States increases the cost of producing something here, they will simply produce it somewhere else where it won’t be taxed and the United States cannot tax them on it.”

Kish also said that in addition to not affecting gas prices, the Democrats’ plan may end up costing American jobs. Oil companies expend “massive amounts” of capital investments in oil exploration that results in job creation, he said, and higher taxes could drive that investment overseas.

“This is the nature of the beast,” he explained. “You’re either going to have that investment here or you’re going to penalize that investment, in which case it will go somewhere else. It means fewer jobs and more un-American energy.”

According to the American Petroleum Institute (API), the oil and natural gas industry in the United States supports 9.2 million jobs and 7.5 percent of GDP. It also generates nearly $100 million in revenue for the federal government every day.