December 15, 1979
Page 36263
Mr. LONG. Mr. President, I yield my remaining time to the majority leader.
Mr. ROBERT C. BYRD. Mr. President, over the past weeks of debate on the windfall profit tax, there has been considerable discussion of the amendment offered by the distinguished Senator from Missouri. This amendment concerns the taxation of revenues derived by certain States from the sale of State-owned property — in this case, oil. The distinguished Senator from Missouri contends that the windfall revenues accruing to certain States as a result of oil price decontrol and rising oil prices should be taxed by the Federal Government in a manner similar to the levy to be imposed upon other oil producers. Such a precedent would have far-reaching consequences and is a step which should not be taken by the Congress.
The distinguished chairman of the Finance Committee has, at various times during this debate, presented several persuasive arguments against this amendment. This measure would constitute a tax directly on the State governments themselves, which raises serious constitutional questions.
Before the Senate decides to tax Louisiana on its oil or, at some later time, West Virginia on its coal, or Kentucky on its coal or Virginia on its coal or Florida on its phosphate, we should seriously consider whether any tax on State-owned property is constitutional. There are valid legal arguments on both sides of this issue and Supreme Court quotations are available to support either case. I do not believe that this is the time or the place to decide this complex question.
I am convinced that passage of this amendment would lay the groundwork for a new revenue sharing scheme whereby the individual States would be deprived of the right to benefit from their own natural resources. Such a policy would be directly contrary to the theory of land management which Congress has repeatedly articulated. We must be aware of where the Federal Government's power to tax the States begins and ends. The Danforth amendment would seek to impose a Federal tax on the income to be obtained from State lands — a policy which, I believe, is unwise, unnecessary, and unconstitutional.
I respect the concern which the Senator from Missouri has expressed regarding the economic disparity among States which may result from windfall oil revenues. I would deplore the economic warfare which he predicts will be waged by oil producing States upon other members of the Union. However, I do not share his belief that this will be the case. The policy incorporated in the Danforth amendment would challenge valued principles of our Federal constitutional system and would result in unwise public policy at a time of urgent national need.
I respect the Senator from Missouri. I think he is a very fine Senator. He is dedicated, he has fought a good fight, and I apologize for having to take the opposite view today with respect to his amendment, but I urge the Senate to table the Danforth amendment.
The PRESIDING OFFICER. Who yields time?
Mr. DANFORTH. Mr. President, I yield 1 minute to the Senator from New York.
Mr. JAVITS. Mr. President, I had not intended to participate in this debate at all, but I am brought to my feet by what Senator DANFORTH said about his fight, which was a very gallant one, and I think a very useful one, especially when he said we were sent here to do what our consciences dictated in the interests of the whole Nation and the interests of the people of our States.
I have been here a long time, Mr. President, and Mr. DANFORTH is a young man who has been here a relatively short time. I want very much to encourage him and every other Senator in that spirit. I deeply believe that whatever may be his impression of the irritation it may have caused by his raising this very serious question to so many States and, therefore, their Senators, it is still a very useful exercise to have the matter debated and resolved by the Senate today, and I congratulate him on it.
I hope other Senators will emulate that example. Having served here a long time, I do not believe that even those who he believes are today irritated with him or resentful will persist in that once the struggle is over. That is not the spirit of this place or the spirit of the individuals who have given it the great state which it holds in our country and in the world.
Mr. MUSKIE. Mr. President, it is with regret that I oppose the amendment of Senator DANFORTH. He has done the Senate a service by bringing to our attention the tremendous disparities in the fortunes of various States as a result of OPEC oil price increases and decontrol of crude oil prices. This is a matter which should be of concern to the Senate.
But the Danforth amendment would do little to correct these disparities and it would create a potentially troublesome precedent regarding Federal taxation of State revenues from resource-related activities.
I have studied with interest the data on the revenue gains that will accrue to various States because of rapidly rising oil prices. It is indeed awesome that $127.6 billion of additional State and local taxes on oil-related earnings, severance taxes and oil royalties will go to State and local governments over the next decade. It is indeed striking that 83 percent of this will go to four States — Alaska, Texas, California and Louisiana.
But it is also important to note that only $33.1 billion of the total revenue gain is in the form of royalties. Only in the case of Alaska do royalties constitute a large proportion of current revenues. And it is only royalties that are tapped by the Danforth amendment.
Therefore, the Danforth amendment can do little to correct regional disparities in income gains from the explosion of oil prices. It would absorb well under 10 percent of the total expected rise in oil-related State and local revenues. And by absorbing these added revenues, this amendment could contribute to a more rapid phase-out of the entire windfall tax, to the benefit of the oil companies.
However appropriate it might seem to redistribute some of the revenue gains that are disproportionately concentrated in a few States, it would be unwise to attempt a small step in the direction of equity at a large cost in terms of precedents relating to the tax code.
The issue of Federal taxation of State activities associated with State-owned properties is a complex one. When is an activity truly commercial and when is the role of the State passive? What activities are uniquely governmental and what are not? When is a tax nondiscriminatory — when it applies to production of all oil whether publically or privately owned, or only when it applies equally to all mineral production? We have heard many cases cited and legal arguments presented.
I shall not add to that debate but simply note that the Danforth amendment, were it to be adopted, would surely be litigated in the Supreme Court with highly uncertain consequences for the tax status of other State activities. I wonder whether any benefits from the Danforth amendment justify creating these legal uncertainties with potentially very significant effects. There are many revenue producing activities — other than conventional taxes — that are engaged in by many States. If revenues from these sources were to be reduced by Federal taxation, State and local taxes would have to make up the difference.
It cannot be said what the regional economic consequences of such legal changes would be until we know to what other revenue raising activities a Danforth precedent might extend. Oil riches are distributed unevenly around the country. So are mineral deposits and timber lands. And some States rich in oil or other natural resources nonetheless have low-income populations. Some States lacking a current natural resource advantage may have a strong industrial base because of other accidents of history.
Disparities in regional economic circumstances and prospects are important concerns for national policy — and I appreciate Senator DANFORTH's concern with this issue. But these disparities cannot be addressed by a piecemeal approach. For these reasons, I oppose the Danforth amendment while having supported efforts to obtain reasonable revenues from the windfall profit tax and looking forward to an equitable distribution of those revenues by region, income class and other relevant criteria of public policy.