Senate Democrats propose raising a tax on oil companies to bolster spill liability fund

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Senate Democrats on Tuesday proposed quintupling the tax that oil companies pay into a spill liability fund as they seek to pare back a House-passed tax hike on investment fund managers.

The tax changes are being made as the Senate again takes up legislation extending unemployment benefits and a variety of expired tax breaks enjoyed by both individuals and businesses.

Majority Leader Harry Reid (D-Nev.) also proposed restoring $24 billion in aid to cash-strapped states to help them pay for their Medicaid budgets next year. Deficit concerns prompted House leaders to scrap a companion plan last month, generating criticism from governors and labor unions, who say that without the funding, states would have to lay off workers and make other cuts to make up for the budget shortfall.

The legislation unveiled Tuesday would raise the tax on oil produced offshore from 8 cents to 41 cents per barrel. That’s nine cents higher than legislation that passed the House last month.

The move to increase the tax would raise $15 billion over the coming decade as Congress seeks to shore up the fund in the wake of the catastrophic spill in the Gulf of Mexico.

-- Associated Press