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New York (CNN Business)Democratic Sen. Ron Wyden is drawing up a surtax on Big Oil that would seek to rein in the industry’s skyrocketing profits at a time when gasoline prices are at record highs.

Wyden, an Oregon Democrat who chairs the Senate Finance Committee, is floating a 21% surtax on the excess profits of oil and gas companies that generate more than $1 billion in revenue, according to a spokesperson for the senator.
“Our broken tax code is working for Big Oil, not American families,” Wyden told CNN in a statement.

The proposal, reported earlier by Bloomberg News, also calls for a 25% excise tax on stock buybacks and would close an accounting loophole on inventories that critics say allows oil companies to understate their profits and defer taxes indefinitely.

“The proposal I’m developing would help reverse perverse incentives to price gouge by doubling the corporate tax rate on companies’ excess profits, eliminating egregious buybacks, and reducing accounting tricks,” Wyden said.

Such a move could be popular given that oil company profits are surging, and gasoline prices are at record highs.
However, there is a risk that imposing an additional tax on the oil industry would backfire by depressing investment at a time when companies need to spend more on expensive new drilling projects to keep up with demand.

“Policymakers should be focused on increasing energy supply and reducing costs for Americans,” Frank Macchiarola, senior vice president of policy, economics and regulatory affairs at the American Petroleum Institute, said in a statement. “Imposing new taxes on our industry will do the exact opposite and only discourage investment at a time when it’s needed most.”
It’s not clear if the White House would support the surcharge floated by Wyden. The White House did not immediately respond to a request for comment.
However, last week a White House official blasted “outrageous” oil company profits in an interview with CNN and left the door open to supporting a windfall profit tax.
President Joe Biden turned up the rhetoric against the oil industry on Friday, calling out ExxonMobil in particular.
“Exxon made more money than God last year,” Biden said.

A Wyden spokesperson said the senator’s oil surcharge stands out from similar windfall profit taxes introduced in Congress because it would apply the tax based on profit margins, not oil prices.
Specifically, it would apply a 21% additional tax on excess profits. The proposal would calculate excess profits by subtracting a normal return of 10% on expenses from current profits. Only companies that generate excess profits, under this proposal, would be required to pay the tax.
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