Senate plans a higher oil tax

WASHINGTON - Senate Democrats on Tuesday proposed quintupling - to 41 cents a barrel from 8 cents - the tax that oil companies pay into a fund to cover cleanup of oil spills, like the current BP one in the Gulf of Mexico.

In their plan, Democrats linked the increase in the oil tax to help for the jobless, doctors and cash-starved states.

The sprawling, 364-page bill contains many provisions long overdue for completion by Congress, including the renewal of dozens of popular but expired tax breaks for individuals and businesses.

Many elements of the bill, like the tax cuts and further unemployment benefits for people out of a job for more than six months, enjoy broad support. But Republicans are generally opposed to the measure because it contains almost $60 billion in tax hikes.

Even with those levies - on investment fund managers, oil companies and some international businesses, among others - the measure would add about $80 billion to the deficit by 2020, congressional analysts said.

It closely resembles a bill that passed the House last month.

The changes by the Senate, where passage is expected next week, would send the measure back to the House for another vote.

One part of the plan would restore $24 billion in aid to cash-strapped states to help them pay for their Medicaid budgets next year.

The 41-cent per barrel tax proposed by Senate Democrats is 7 cents higher than legislation that passed the House last month. It will raise $15 billion during the coming decade as Congress seeks to shore up the fund in the wake of the catastrophic spill in the Gulf of Mexico.

But it's also being used to ease a tax hike passed by the House on investment fund managers and to help pay for other tax cuts.

The measure is coming back for a second debate in the Senate because it was never sent to an official House-Senate negotiating committee. The changes made by the Senate, where passage is expected next week, would send the measure back to the House for another vote and then on to President Obama for his signature.

A temporary extension of unemployment benefits and other lapsed programs expired last week, which means that more than 200,000 people per week who are eligible to reapply for jobless checks won't be able to do so. The cut-off does not affect the newly jobless, who are covered under state-financed unemployment insurance.

The bill also contains a $1 billion summer jobs initiative aimed at employing 350,000 youth aged 14 to 24 years old. The traditional Memorial Day start of summer has already passed, however, and it's unclear how quickly the program can be implemented.