August 12,2022

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Wyden Unveils Taxing Big Oil Profiteers Act

Washington, D.C. – Senate Finance Chair Ron Wyden, D-Ore., today unveiled the Taxing Big Oil Profiteers Act. The bill would double the tax rate of Big Oil’s excess profits, impose an excise tax on stock buybacks benefiting wealthy shareholders, and close one of Big Oil’s favorite tax loopholes. 

The bill is also sponsored by Senators Schumer, Murray, Stabenow, Casey, Padilla, Hirono, Booker, Klobuchar, Reed, Warnock, Feinstein, Blumenthal, and Van Hollen

“Our broken tax code is working for Big Oil, not American families. While Americans pay more to fill up their gas tanks, Big Oil companies are raking in record profits, rewarding their CEOs and wealthy shareholders with massive stock buybacks, and using special loopholes in the tax code to pay next to nothing in taxes,” said Chair Wyden. “Our tax code should benefit the American people, not oil executives and their wealthy shareholders. Our Taxing Big Oil Profiteers Act 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. By contrast, companies that provide relief to consumers by reducing prices or investing in new supply would not be affected. It’s long past time to fix our broken tax code.” 

First, the bill applies a 21 percent additional tax on the excess profits of oil and gas companies with more than $1 billion in annual revenue. Excess profits are calculated by subtracting a normal return–a 10 percent return on expenses–from current profits. Excess profits are subject to the 21 percent additional tax, which would be added to any regular income tax due by the taxpayer. 

The senators’ new approach differs from other proposed windfall profits taxes by applying the tax based on profit margins, not oil prices. This proposal more accurately assesses companies’ financial picture. Companies making normal profits based on their expenses would not pay any additional tax. 

Second, the bill imposes 25 percent excise tax on stock that is repurchased by the corporation. For example, Exxon announced last month its intention to repurchase $30 billion in stock by the end of 2023. Similarly, Chevon announced last month its intention to repurchase $10 billion in stock by the end of 2022.  

Third, the bill closes a loophole that allows big oil companies to game the value of their inventories by using an accounting method that ensures they are always deducting the newest, most expensive inventory, rather than the oldest, least expensive inventory. This allows them to understate their true profits and defer taxes on those profits indefinitely. 

Text of the legislation is available here. 

Statements of Support from Cosponsors

“What we’re proposing here is pretty simple—giant oil and gas corporations shouldn’t be profiting off a crisis at the expense of people in Washington state who are just trying to fill up their cars to get to work, pick up their kids, and get around,” said Senator Murray. “Our tax code should be working for the mom in Spokane who is stressed because her kids just told her she needs to pick them up from across town and she’s going to have to fill up her tank to get there and back—and she has to commute to work, pick up groceries, and get her prescriptions. It all adds up, so our job in the United States Senate is to put that mom before some giant oil and gas corporation. My focus is lowering costs at the pump for families in Washington state and making sure big oil and gas corporations aren’t rigging the tax code at the expense of working people.”

“Oil and gas companies are padding their pockets with record-high profits while price-gouging hardworking Michiganders at the pump,” said Senator Stabenow. “This critical legislation will make sure these companies pay their fair share in taxes and bring much-needed relief to drivers. It’s time that big oil and gas put people before profit.”

“We must ensure that Big Oil companies are held accountable as they continue to artificially inflate gas prices and take advantage of Americans at the pump while making record profits,” said Senator Padilla. “I am cosponsoring the Taxing Big Oil Profiteers Act to increase the corporate tax rate on Big Oil’s excess profits, halt outrageous stock buybacks, and support companies that provide price relief for Californians and all Americans.”

“While working families struggle to keep up with skyrocketing gas prices, Big Oil companies are raking in billions of dollars in profits, all while using special tax breaks to avoid paying their fair share,” said Senator Hirono. “It is inexcusable for corporations to use a time of crisis to raise their profit margins at the expense of consumers, especially when it comes to something as essential as gasoline. This common-sense legislation will help to end these egregious practices by increasing taxes on excessive profits of oil companies who exploit consumers instead of focusing on reducing prices. As we work to lower costs for consumers and hold corporate actors accountable, this bill will help make our tax code and economy more fair and equitable.” 

“Putin is weaponizing oil prices against the West, and Big Oil companies are playing the role of beneficial enablers, raking in record windfall profits while average consumers shoulder all of the financial burden.  Instead of exploiting Putin’s invasion of Ukraine to pad record profits and reward executives, Big Oil companies should increase production and ease prices.  This bill would incentivize oil companies to do the right thing,” said Senator Reed.

“Prices at the pump remain stubbornly high, which is why I’ve been laser-focused on lowering gas prices and bringing relief to Georgians,” said Senator Reverend Warnock. “I was in Sandy Springs not too long ago speaking with drivers who are really struggling with these high gas prices. Corporations are making record profits while Georgians are paying higher prices just to get where they need to go. This critical legislation will bring needed balance that will help provide relief for Georgians’ pockets and accountability for Big Oil and Gas. Congress needs to take up and pass this bill as quickly as possible.”

“Oil companies are taking advantage of tax loopholes to rake in record profits and reward executives and wealthy shareholders while charging Americans exorbitant prices at the pump,” said Senator Feinstein. “Our bill would restore fairness to the tax code to ensure oil companies don’t have incentives to charge prices that millions of Americans find unaffordable.”

“While consumers suffer unprecedented pain at the pump, Big Oil companies are pocketing record profits—which this measure would help address,” said Senator Blumenthal. “They’re boasting about their profiteering— bragging of stock buybacks and increased dividends at the expense of consumers’ household costs. By closing loopholes in our tax code, the Taxing Big Oil Profiteers Act will ensure oil giants pay their fair share and reduce prices for drivers.”

“No one should be profiteering from Putin’s brutal war in Ukraine, but that’s what Big Oil is doing. It’s past time to put people over profits and consumers over corporate greed. This legislation will fix our broken tax code to both ensure that Big Oil is paying its fair share and that they face consequences for price gouging American people,”  said Senator Van Hollen.

Statements of Support

“The oil industry is reaping obscene windfall profits because of Putin’s war at the expense of American consumers. The legislation that Chair Wyden and his colleagues are introducing would recoup Big Oil’s excessive profits and return them to the American people. As the Center for American Progress explained in a recent report, an oil windfall profits tax will raise revenue to help American families with the high energy costs they are now facing – and since the price of oil is set on the world market, and the bill taxes profits not production inputs, there is zero reason to believe it will raise gas prices,” said Seth Hanlon, Senior Fellow, Center American Progress. “The Taxing Big Oil Profiteers Act raises incentives for near-term production, including by taxing oil companies’ stock buybacks. And it also reforms a major, unjustified tax loophole – last-in, first-out accounting – that the oil industry has exploited for decades. Chair Wyden and his colleagues should be commended for putting forward a concrete plan to help Americans with their energy costs. Congress should take it up as soon as possible."

“Voters understand that oil and gas CEOs are gouging them at the pump and raking in record profits while they and their families suffer, and they want Congress to do something about it,” said Matthew Davis, Senior Director of Government Affairs, League of Conservation Voters. “We appreciate the leadership of Leader Schumer and Chair Wyden in taking on Big Oil and will continue to push for these reforms and swift Senate passage of the $555 billion of House-passed investments that will transition us into a clean energy future and true energy independence.”

"Big Oil is shamelessly seeking to profit off of the humanitarian crisis in Ukraine by jacking up prices and enriching their shareholders while American consumers pay the price," said Mahyar Sorour, Deputy Legislative Director, Sierra Club. "We applaud Senator Wyden for his leadership in protecting our families from fossil fuel industry greed and ensuring Big Oil pays their fair share." 

“Americans overwhelmingly support bold action that addresses the climate crisis and creates abundant clean energy here in the U.S., making our country more secure,” said Fredd Krupp, President Environmental Defense Fund. “Chairman Wyden continues to advance these shared goals with common-sense ideas that Congress should consider.”  

“Giant corporations should not be using the temporary spike in inflation around the world to reap excessive profits from working families here at home,” said Frank Clemente, executive director of Americans for Tax Fairness. “The Taxing Big Oil Profiteers Act would claw back some of the outrageous profits huge oil and gas corporations are wringing out of commuters and homeowners this year. It would also tax those oil and gas firms that reward their CEOs and other rich shareholders with stock buybacks at the expense of higher worker pay and community investment; and close an accounting loophole Big Oil uses to lower taxable profits. We commend Senate leaders for standing with consumers and working families by holding big oil and gas corporations accountable through this legislation and urge its swift passage."

"Profits for the oil and gas giants are soaring while consumers are being squeezed by record-high prices at the pump," said Lindsay Owens, executive director of the Groundwork Collaborative. "It's time to hold these oil and gas companies accountable for gouging Americans under the cover of foreign war-- and the Taxing Big Oil Profiteers Act would do just that."