Reagan asks to end oil windfall-profits tax
The Shah of Iran was overthrown in 1979. The price of oil, just decontrolled in the United States, was streaking up. So by March of 1980 Congress enacted a windfall-profits tax on oil companies. Now the White House wants to end the tax. In its budget to Congress, the Office of Management and Budget (OMB) has hidden this measure in a section detailing fees and other revenue changes. The proposal surprised some, including William Gray, the House Budget Committee chairman from Pennsylvania. ``I doubt the Congress will seriously take this up,'' Democrat Gray says.Skip to next paragraph
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This year the tax is not expected to result in much income for the government, because the price of oil has fallen so low. The price has to be about $19.20 per barrel for the windfall-profits tax to go into effect. Currently the price is about $18.22 per barrel.
The government has collected about $76 billion since the tax was enacted. Last year, the OMB estimated it would collect about $2.7 billion in taxes for 1987. But with the price of oil low, it may not even collect that much.
During the tax-reform debate last year, the Senate, at the urging of oil-state legislators, voted to eliminate the tax. Based on the price of oil, the Congressional Budget Office figured the loss would cost the government $7 billion in 1987. Because Congress could not find a way to make this up, the idea was dropped.
An OMB spokesman, Ed Dale, said the White House has made the proposal because it does not want to inhibit the oil industry from drilling new wells. ``Even though it's not costing the industry anything, we don't want this to be a deterrent to further exploration,'' says Mr. Dale. -R.S.