June 01, 2012

June Governmental Affairs Report


Martin Frost
DEPA Lobbyist     
For history buffs, there was a period of time between September of 1939 when Germany invaded Poland and in the spring of 1940 when Germany invaded France, that not much happened.  It was called the “phoney war.”
We are now engaged in another of one of those historic lulls when not much is going on involving the fight over energy tax policy in this country.  However, don’t be misled.  The big battle is just over the horizon next year and there may be some scene setting activity in Congress this Fall before the election. 
Republicans and Democrats in Congress are currently engaged in shadow boxing over the issue of raising the debt ceiling prior to the election.  Republicans are threatening to create a crisis by refusing to support any increase in the debt ceiling unless the President agrees to additional budget cuts and Democrats are responding that taxes must also be in the mix before they will consider more budget cuts.
Also, both sides are calling for a vote prior to the election on the issue of extending some or all of the Bush era tax cuts that are scheduled to expire on Dec. 31st of this year.  And then there is the additional issue of avoiding some of the effects of sequestration (automatic budget cuts) on defense spending.  Sequestration is scheduled to take effect on Jan. 1st of next year.
The Chairman of the Federal Reserve has warned that the country could face a fiscal cliff in January if taxes are increased by $4 trillion because of the expiration of the Bush tax cuts and if $1.2 trillion of sequestration goes into effect as scheduled for both defense and non-defense spending.  This could take $5 trillion out of the economy, he warned.
The point of all this is that there will be considerable gnashing of teeth in Congress over taxes in the months ahead though it is unlikely anything specific on energy taxes will happen prior to the election or even in the lame duck session after the election.
However, it is possible that the two parties will agree on a framework for tax reform in the next Congress.  This could include a specific time schedule for action by the Senate Finance Committee and the House Ways and Means Committee next year.  It also could involve agreement on what type of tax preferences will be reviewed by the two committees.  
The point of all this is that we should keep an eye on everything that is said or agreed to in the months ahead because these will be major scene setters for the fight ahead in the next Congress.
I will closely monitor everything that happens in this regard and let’s just hope that any agreement by the two parties is general enough that it doesn’t lock them into punitive action against our industry.
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