14 February 2011 19:45 [Source: ICIS news]
Although the budget proposal eliminates, or cuts, spending for as many as 200 federal programmes, it also includes spending increases for education, transportation infrastructure and research and development (R&D) work by government-funded science agencies.
The budget also indicates that the federal government will operate at a deficit of more than $1,500bn for the 2012 fiscal year, a larger pool of red ink than was seen in even the recent recession years.
To partially offset the spending increases and stem the flow of red ink, the proposal would eliminate tax credits for some manufacturing sectors, including oil and gas exploration and development.
The energy sector views the loss of those tax credits as tax increases, and its top officials charged the White House with singling out the hydrocarbon energy industry for punishment while spending billions to subsidise alternative energy projects such as corn ethanol, wind and solar power.
“It’s no surprise that the administration is proposing yet again to raise taxes on the
In budget proposals for the two previous fiscal years, Obama also sought to cut the energy sector’s tax credits and incentives, but those efforts were rejected by Congress, which has final say over the federal budget.
Gerard said that the proposed cut in energy development tax credits “is still a bad idea and comes at one of the worst times in our economic history”.
“The industry pays income taxes, royalties and other fees totalling nearly $100m every day, and pays income tax at an effective rate that is far higher than most other industries,” he said.
Gerard said the elimination of energy sector tax credits would hurt
“Besides eliminating thousands of new potential jobs, the increases, over the long term, would actually lower revenue to the government by many billions of dollars as a result of foregone revenues from projects the tax hikes would prevent from going forward,” he said.
Charles Drevna, president of the National Petrochemical & Refiners Association (NPRA), also criticised the White House budget, saying the loss of the tax credits and deductions would “weaken America’s oil production, refining and petrochemical industries, increase our reliance on foreign nations and would send more American jobs and American dollars abroad”.
“Oil companies do not get subsidies,” Drevna said. “Like other American businesses, oil companies get tax deductions for the products they produce and the jobs they create. President Obama’s budget proposal would cut those deductions for energy companies to force up their taxes.”
If approved by Congress, Drevna said, the budget proposal’s cuts in energy sector tax credits “would drive up the cost of gasoline, diesel fuel, home heating oil, jet fuel and petrochemicals - hurting every American consumer and every American business”.
The president’s formal budget proposal kicks off a round of hearings and changes by multiple committees in the US Congress that should produce a final budget compromise with the White House before the start of the 2012 fiscal year on 1 October 2011.
But Congress failed to complete work last year on the fiscal year 2011 budget, and the government has been operating on continuing resolutions that allow federal spending at 2010 levels for the short term.
Before completing work on Obama’s proposed fiscal year 2012 budget, Congress must, in the weeks ahead, approve another continuing resolution to chart federal outlays for the rest of the current fiscal year to 1 October.
($1 = €0.74)
For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.
Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.
|ICIS news FREE TRIAL|
|Get access to breaking chemical news as it happens.|
|ICIS Global Petrochemical Index (IPEX)|
|ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index|
Asian Chemical Connections