The Congressional Record is a unique source of public documentation. It started in 1873, documenting nearly all the major and minor policies being discussed and debated.
“TAX FAIRNESS” mentioning the U.S. Dept. of Energy was published in the Senate section on pages S13649-S13651 on Nov. 1, 2007.
The publication is reproduced in full below:
TAX FAIRNESS
Mr. ALEXANDER. Mr. President, I wish to say a word about tax fairness. Last week, I joined Senator Hutchison, who has been the leader on this issue, Senator Cornyn, and Senator Corker from my home State of Tennessee in introducing S. 2233. Our goal with that legislation is to make the State and local sales tax deduction permanent.
As a former Governor, I know States and cities have many different ways to raise revenues to support the services they provide. States usually provide about half the funding for elementary and secondary education. They are the principal funder of community colleges and universities. They pay for a good part of the roads and all the prisons. So most States have pretty big bills to pay, and they have a variety of taxes to raise the money to pay for those bills. Some States levy an income tax. Some use a sales tax. Some use a combination of the two. Some use some other taxes.
In Tennessee, we have had a pretty good debate about this issue, and we have decided we don't want an income tax. I looked at the options myself when I was Governor in the mid-1980s and considered an income tax for Tennessee but decided it would be the wrong thing to do, to put a tax on work. We have done pretty well with low taxes and without an income tax.
Americans who pay State and local income taxes are able to claim a deduction for those amounts on their Federal income tax, and before 1986, taxpayers also had the ability to claim a deduction on their State and local sales taxes. But this deduction for State and local sales taxes was repealed in 1986.
Congress temporarily reinstated that State and local sales tax deduction for 2004 and 2005 and then extended it again for 2006 and 2007. I was a part of the effort in this Chamber to do that. It was a bipartisan effort. So taxpayers today who itemize on their Federal income tax returns can deduct either State and local sales taxes or State income taxes. Yet, unless Congress takes further action, this sales tax deduction will expire at the end of December of this year.
This is not about cutting taxes; this is about tax fairness. It is not fair for States without income taxes to subsidize tax deductions for States with income taxes. Why is it our business in Washington, DC, to prefer an income tax in the various States?
Nine States, including Tennessee, do not impose a State income tax. They are Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming--States from across the country, some big States, some middle-size States, some of our smallest States. These States shouldn't be treated differently. If Congress doesn't act, they will be by the end of December 2007.
I am here today to urge this body to make permanent the deduction for State and local sales tax. At the very least, we need to temporarily extend the deduction, as we have done in the last two Congresses, before it expires on December 31 so that taxpayers in those nine States are not forced to pay an unfair share of taxes.
We are talking about large amounts of money. Nearly 600,000 Tennesseans itemized their taxes and claimed the State and local sales tax deduction last year. This benefit put an average of $400 in the pockets of hard-working Tennesseans. Therefore, losing this deduction would cost Tennesseans nearly a quarter of a billion dollars right out of their pockets each year.
Extending the State and local sales tax deduction is the fair thing to do, and it is the right thing to do. I urge my colleagues to join Senator Hutchison, Senator Cornyn, Senator Corker, and me in enacting S. 2233 before the end of the year.
I yield the floor.
The ACTING PRESIDENT pro tempore. The Senator from Tennessee.
Mr. CORKER. Mr. President, I also rise today to speak regarding S. 2233. I am always honored to be in the presence of our senior Senator from Tennessee. I am honored to follow him today talking about the same topic.
One of the great points about our country is that we are set up in a manner that we allow States to choose how they govern on issues relating to the way they tax their citizens. As Senator Alexander just stated, in the State of Tennessee, we have decided, after a tremendous amount of debate over decades, that we like being taxed through a sales tax.
As you know and as was just stated, Americans all across the country who are in States where they have an income tax or payroll tax are able to deduct that from their Federal income taxes. Again, in order to continue to support the fairness of the way we treat States, certainly those who choose to use a sales tax to raise revenues for roads and schools and want to leave it in the hands of their citizens to decide how much they pay in income tax, those States ought to be allowed to deduct those taxes from their Federal income taxes.
This is an issue of fairness. This absolutely is an issue of fairness. I hope today--we have introduced a bill, as Senator Alexander stated--to convince other Senators that this is an issue of fairness and that they should support this bill which will permanently allow the nine States that today use a sales tax as a way of raising revenues for their States to be able to deduct those taxes.
As was mentioned, 11.2 million Americans across our country took a sales tax deduction last year. Mr. President, 600,000 Tennesseans took that deduction, and it saves Tennesseans about $400 a year.
Since much has already been said, I close my comments again urging Senators on both sides of the aisle to support this bill which indicates fairness for all Americans.
The ACTING PRESIDENT pro tempore. The Senator from Oklahoma.
Mr. INHOFE. Mr. President, the leadership targeted November 16 for adjournment of this session of Congress, although I think we all believe that is a little overly optimistic. Regardless, I am concerned that as of yet, we have not considered an annual tax-extender package containing an extension of a number of very beneficial tax provisions. I am pleased to join with my colleagues to discuss the need to address many beneficial tax-extender provisions.
I wish to highlight two tax provisions of particular interest to me that Congress has annually extended, one ever since 1991 and one since 1993, and they particularly benefit oil and gas development from marginal wells and depreciation. Specifically, these two tax provisions are the suspension of the net income limitation on percentage depletion allowance for marginal oil and gas proceedings and accelerated depreciation for assets in Indian Country.
The United States has approximately 457,000 marginal wells. That is a huge number. A marginal well is one that produces 15 barrels or less a day. A lot of these wells are located in my State of Oklahoma. They collectively produce about 1.2 million barrels per day of annual production. These wells account for nearly 20 percent of the total oil production in the United States, about the amount we are importing from Saudi Arabia.
People do not understand the significance of marginal wells. They cost a lot more to produce--marginal wells. These are shallow wells. They are not profitable like the deep wells in some parts of the country. But when you add them all up, it means this production equals as much as we are currently importing from Saudi Arabia. So it is very significant.
In my State of Oklahoma, it is the small independents--basically the mom-and-pop operators--that are producing the majority of oil and natural gas, with 85 percent of Oklahoma's oil coming from marginal wells--again, that is 15 barrels or less a day. Because marginal wells supply such a significant amount of our oil and gas, it is vital we keep them in operation. However, according to the Department of Energy, between 1994 and 2003 the United States lost 110 million barrels of crude oil due to the plugging of marginal wells.
A lot of people not familiar with the industry think you can always unplug a well. You can't unplug a well. Once you plug it, it is gone. Thus, when we lose marginal well production, we become more dependent upon foreign sources of energy and more dependent at a time when I think almost all of us in here agree that U.S. policy should encourage reliance upon domestic sources. Furthermore, we lose domestic jobs to foreign nations.
If the current suspension of the net income limitation on percentage depletion allowance expires, U.S. production from our marginal wells would be severely hampered. Percentage depletion is a form of cost recovery for mineral and leasehold acquisition costs. The percentage depletion rate for oil and gas is 15 percent of the taxpayer's gross income from a producing property. It used to be closer to 30 percent. It should be higher than 15 percent, but that is where it is today. Only independent producers and royalty owners are able to utilize percentage depletion.
Under the net income limitation, percentage depletion is limited to 100 percent of the net income from an individual producing property. In the case of marginal wells, where total deductions and expenses often exceed gross income, this limitation discourages producers from investing in the continued production for marginal wells with high operating costs and low production yields.
Without the full utilization of the percentage depletion allowance, the net income limitation actually encourages producers to plug and abandon production of marginal wells. Then, of course, as I said before, you have lost them forever.
Congress has, on a temporary basis, suspended the net income limitation since 1997. The current suspension expires at the end of this year. The extension of the suspension of the net income limitation will allow independents the necessary capital to continue to produce from these existing marginal wells, which is critical to the Nation's overall energy security.
Now, additionally, Congress made a special economic incentive available to benefit Indian Country under the Omnibus Budget Reconciliation Act of 1993. It provides for special accelerated depreciation for new and used assets acquired after December of 1993 on Indian reservations and former Indian reservations in Oklahoma and elsewhere. This depreciation incentive provides an approximately 40 percent shorter recovery period for most commercial property. This accelerated depreciation schedule has been successful in encouraging capital-intensive businesses to locate and expand in Indian Country in Oklahoma and throughout the Nation.
Both of these important provisions expire at the end of this year, and it is crucial that Congress act this year to extend each one.
____________________
