Download Locations

• Open CRS (User submitted)

Summary

Historically, U.S. federal energy tax policy promoted the supply of oil and gas. However, the 1970s witnessed (1) a significant cutback in the oil and gas industry's tax preferences, (2) the imposition of new excise taxes on oil, and (3) the introduction of numerous tax preferences for energy conservation, the development of alternative fuels, and the commercialization of the technologies for producing these fuels (renewables such as solar, wind, and biomass, and nonconventional fossil fuels such as shale oil and coalbed methane). The Reagan Administration, using a free-market approach, advocated repeal of the windfall profit tax on oil and the repeal or phase-out of most energy tax preferences -- for oil and gas, as well as alternative fuels. Due to the combined effects of the Economic Recovery Tax Act and the energy tax subsidies that had not been repealed, which together created negative effective tax rates in some cases, the actual energy tax policy differed from the stated policy. The George H. W. Bush and Bill Clinton years witnessed a return to a much more activist energy tax policy, with an emphasis on energy conservation and alternative fuels. While the original aim was to reduce demand for imported oil, energy tax policy was also increasingly viewed as a tool for achieving environmental and fiscal objectives. The Clinton Administration's energy tax policy emphasized the environmental benefits of reducing greenhouse gases and global climate change, but it will also be remembered for its failed proposal to enact a broadly based energy tax on Btus (British thermal units) and its 1993 across-the-board increase in motor fuels taxes of 4.3?/gallon. The 109th Congress enacted the Energy Policy Act of 2005 (P.L. 109-58), signed by President Bush on August 8, 2005, provided a net energy tax cut of $11.5 billion ($14.5 billion gross energy tax cuts, less $3 billion of energy tax increases) for fossil fuels and electricity, as well as for energy efficiency, and for several types of alternative and renewable resources, such as solar and geothermal. The Tax Relief and Health Care Act of 2006 (P.L. 109-432), enacted in December 2006, provided for one-year extensions of these provisions. The current energy tax structure favors tax incentives for alternative and renewable fuels supply relative to energy from conventional fossil fuels, and this posture was accentuated under the Energy Policy Act of 2005. At this writing, the House has approved the Comprehensive American Energy Security and Consumer Protection, which passed on September 16, 2008. This bill is broad-based energy policy legislation, that also includes extension and liberalization of energy tax subsidies -- provisions that were in earlier bills such as H.R. 5351 and H.R. 6049 (which were approved by the House earlier this year).In the Senate, legislative efforts on energy tax incentives and energy tax extenders center around S. 3478, the Energy Independence and Investment Act of 2008, a $40 billion energy tax bill offered by Finance Committee Chairman Max Baucus and ranking Republican Charles Grassley. Three other energy tax proposals are being considered in the Senate: (1) the Gang of 20 proposal or "New Energy Reform Act of 2008"; (2) a Bingaman/Baucus bill; and (3) the Republican "Gas Price Reduction Act" (introduced by Senator McConnell as S.Amdt. 5108).

Related Legislation:
• H.R.5351
• H.R.6049
• S.3478
• S.1993

XML