WASHINGTON — Senate Democrats Tuesday proposed quintupling the tax that oil companies pay into a spill liability fund as they seek to pare back a House-passed tax hike on investment fund managers.
The tax changes are being made as the Senate again takes up legislation extending unemployment benefits and a variety of expired tax breaks enjoyed by both individuals and businesses.
Majority Leader Harry Reid, D-Nev., also proposed restoring $24 billion in aid to cash-strapped states to help them pay for their Medicaid budgets next year. Deficit concerns prompted House leaders to scrap a companion plan last month, generating criticism from governors and labor unions, who say that without the funding, states would have to lay off workers and make other cuts to make up for the budget shortfall.
The legislation unveiled Tuesday would raise the tax on oil produced offshore from 8 cents to 41 cents per barrel. That's nine cents higher than legislation that passed the House last month. The move to increase the tax would raise $15 billion over the coming decade as Congress seeks to shore up the fund in the wake of the catastrophic spill in the Gulf of Mexico.
But it's also being used to ease a tax hike passed by the House on investment fund managers. The Senate measure would tax a lower percentage of an investment fund manager's income at regular income tax rates than would the House measure. Under current law, such "carried interest" income is taxed at the 15 percent capital gains rate instead of at regular income tax rates of as high as 35 percent.
The Senate passed an earlier form of the broader legislation back in March. It would extend unemployment benefits for the long-term jobless through November and revive dozens of expired tax breaks for individuals and businesses, including a property tax deduction for people who don't itemize, lucrative credits that help businesses finance research and develop new products, and a sales tax deduction that mainly helps people in states without income taxes.