Senator Sherrod Brown

WASHINGTON, D.C. – On the same day crude-oil futures touched a new record of $111 per barrel, U.S. Senators Charles E. Schumer (D-NY) and Sherrod Brown (D-OH) announced legislation Thursday that would impose a new temporary tax on excess profits reaped by major U.S. oil companies. The measure could receive a vote as soon as tonight if the senators opt to offer it as an amendment to the budget resolution pending before the Senate. The revenue raised from this temporary tax would be placed into the Highway Trust Fund to finance future infrastructure investments, including much needed road and tunnel construction, highway resurfacing, bridge repair, and mass transit projects.

The National Surface Transportation Policy and Revenue Commission, a panel created by Congress to study the current and future needs of American transportation infrastructure, estimates that the U.S. will need to invest $225 billion annually for the next 50 years to maintain and upgrade existing infrastructure. Current U.S. infrastructure expenditures are less than 40% of that estimate.

“Oil companies are wracking up obscene profits while American families are stretched to the limit by skyrocketing gas prices,” Schumer said. “It's not asking too much to redirect a portion of these companies' windfalls to rebuilding our roads, bridges, and tunnels that are in serious need of repair.”

“Gas prices have skyrocketed with consumers struggling and Big Oil swimming in profits,” Brown said. “Meanwhile, our nation’s roads and bridges are deteriorating, and local taxpayers should not be left footing the bill alone. This amendment will tax Big Oil’s soaring profits and put it to good use funding essential road projects, creating jobs, and increasing safety on our nation’s roadways.”

The Schumer-Brown measure would levy a tax on the “windfall profits” of both American oil companies and foreign companies with substantial operations in the U.S. in 2008 and 2009. Unlike previous versions of the legislation, which essentially imposed an excise tax on domestic extraction, the Schumer-Brown bill creates a true temporary tax on windfall profits.

The legislation provides a fair-minded formula for calculating the earnings subject to the tax. Oil companies would calculate their annual profit during the 2003-2007 period, subtract the year that saw the greatest profit, and take an average of the four remaining years. That figure, plus 10 percent, would represent the “reasonably inflated average profit." Any profits earned by companies in 2008 or 2009 that exceed this “reasonably inflated average profit” will be deemed a “windfall profit,” and would be taxed at a special supplemental rate of 25 percent.

Oil companies have recorded record profits over the last two years. Exxon Mobil Corp., the largest oil company in the U.S., posted world record profits for a publicly traded company in 2007, earning over $40 billion. Chevron, the second largest oil company in the U.S. posted profits of over $18 billion last year. The latest quarterly reports show that the companies' earnings are rising even higher. Exxon’s profit increased 14% in the fourth quarter of 2007 to $11.7 billion. Chevron’s fourth quarter income was up 29% over the fourth quarter of 2006, totaling $4.9 billion.

Meanwhile, prices at the pump are approaching an all-time high. According to AAA, the national average is $3.227 a gallon, just 18 cents below the inflation-adjusted record set in 1981.

Schumer first offered legislation of this type in 2005, when he called for a temporary levy on the windfall profits of oil companies in order to fund relief for Hurricane Katrina victims. In addition, earlier this year, Schumer urged the Energy Department's independent watchdog to probe whether the Bush administration's decision to continue filling the Strategic Petroleum Reserve amid record-high oil prices skirts provisions of the 2005 Energy Act. Schumer is a cosponsor of legislation offered by Sen. Byron Dorgan (D-ND) that would compel the Bush administration to stop filling the SPR while prices hover at peak levels.