The Senate plans to vote tonight on the Close Big Oil Tax Loopholes Act, S. 940—legislation that would eliminate $21 billion of tax loopholes over the next decade for the five largest oil companies. The bill, sponsored by Sen. Bob Menendez (D-NJ) and 28 of his colleagues, would close tax loopholes for Chevron Corporation, ConocoPhilips, Exxon Mobil Corporation, and the U.S. subsidiaries of BP Plc and Royal Dutch Shell Plc. And it would require that all recovered funds go to the U.S. Treasury to reduce the federal budget deficit.

Given the current drive to reduce the deficit by slashing existing programs, these funds could potentially replace cuts in other vital programs such as Medicare, cancer research, and food inspections. Yet these five companies continue to fight hard to maintain unfair tax advantages underwritten by everyday Americans who are struggling to pay their bills even as these companies make record profits. Big Oil, in short, wants its tax breaks and its huge profits, too.

Each time Americans’ gas bills go up, so do Big Oil’s profits. In the first quarter of 2011 alone, Persian Gulf unrest combined with speculators bidding up prices led to oil prices rising by more than one-third. Higher oil prices on the world market led to higher gasoline prices across our nation, and the big five oil companies made $32 billion in profits. Profits of this size are quite common. Between 2001 and 2011, a period marked by gas price volatility, these five companies collectively made more than $900 billion in profits. In 2010, Exxon Mobil finished first in the Fortune 500 list of company profits for the eighth year in a row, with Chevron coming in third and ConocoPhilips 16th.

These companies often use their profits not to explore for more oil on or near our shores but rather to boost their stock price via stock buybacks. This is where a company purchases its own shares in the marketplace to reduce the overall number of shares on the market and drive up the price of those remaining shares. Exxon and Conoco spent more than half of their first quarter 2011 profits on buybacks. Back in 2008, when record 2008 oil prices also brought record profits, four of the Big Oil companies spent a major proportion (one-third by Chevron) to nearly all (88 percent by Exxon) on stock buybacks.

Ordinarily huge profits should lead to moderately higher tax bills, returning some benefit to the government and to American taxpayers. Not so in the case of Big Oil. During periods of enormous profits, some of these companies had relatively modest federal income tax bills. From 2009 to 2010 , Exxon Mobil had an average effective federal income tax rate of 17.6 percent—less than the average American family’s rate of 20.4 percent. From 2007 to 2009, Chevron’s average effective income tax rate was about the same as an average family’s tax rate.

Between high profits, stock buybacks, and low taxes, these companies have done very well over the past decade. Yet these five companies alone receive over $2 billion annually in benefits from tax loopholes , some of which are nearly 100 years old. These programs were put in place at a time when oil companies were “emerging industries” that needed government assistance to create the market and infrastructure vital to domestic production. That’s no longer the case.

And make no mistake—these tax expenditures qualify as government spending. They are simply spending programs that operate through the tax code rather than, say, a direct grant or loan program. As then House Minority Leader John Boehner (R-OH) himself noted last year, “what Washington sometimes calls tax cuts are really just poorly disguised spending programs that expand the role of government in the lives of individuals and employers.”

Eliminating the $2 billion in tax loopholes would have only a tiny impact on these companies’ bottom lines. The Congressional Research Service recently determined that “the total expected tax revenues [from the tax provisions] are only 5 percent of the earnings of the five largest firms in the industry.” In other words, eliminating these loopholes would reduce Big Oil’s earnings by one nickel for every dollar of profit.

Despite the claims by Big Oil chief executives before the Senate last week, eliminating these tax breaks would have no impact on gasoline prices or oil production. The CRS concluded that eliminating these provisions “would be less likely to reduce oil output, and hence increase petroleum product (gasoline) prices.” A new report by the congressional Joint Economic Committee came to the same conclusion: “The repeal of the tax breaks will not affect oil and gas production decisions in the near term, and will have little or no impact on consumer energy prices in the immediate future.”

In contrast, diverting these funds to deficit reduction would have an impact on the federal budget deficit. The same congressional Joint Economic Committee study determined that S. 940 would “reduce the deficit by $21 billion over 10 years and encourage investments in alternative energy and energy efficiency.”

We believe this is a valuable bill. Eliminating unfair tax advantages for some of the nation’s most profitable businesses makes eminent sense. We also support deficit reduction as a critical step in these troubled fiscal times. But because the recovered funds would go entirely toward deficit reduction, this bill unfortunately would not actually lower gasoline prices or help American families cope with them. These are critical goals, and we believe Congress must take action to address them. In particular, the Center for American Progress urges the Obama administration and Congress to take action to:

Crack down on the speculation that added at least $20 per barrel to the price of oil this winter and spring during the run up in oil prices earlier this year, according to analysts at Goldman Sachs & Co.

Invest in transportation choices that allow Americans the freedom to ignore high gas prices. These must include choices that meet the needs of different American lifestyles, including urban, suburban, and rural. This includes investments in electric cars, trade-in programs for more fuel-efficient vehicles, public transportation operating funds, and investments in new intercity transit systems such as high-speed rail. For relatively modest investments, we can dramatically increase America’s freedom from oil.

Adopt the next round of fuel economy standards to require cars to get 60-plus miles per gallon by 2025. This would build on the new fuel economy standards that require the average car to get 35.5 miles per gallon by 2016.

These measures are essential to reduce high oil and gasoline prices, reduce oil demand and use, save drivers thousands of dollars in lower fuel purchases, reduce pollution, and enhance national security. Investing in next-generation fuels and vehicles has the added benefit of making American companies more competitive, as they work to design and manufacture the future transportation technologies for both the American market and overseas.

At a Senate Finance Committee hearing last week, the five Big Oil CEO’s continued to whine about the threat of losing their tax breaks despite their enormous wealth and success. Echoing red-baiting Sen. Joe McCarthy, ConocoPhilips actually said that efforts to remove the tax breaks were “un-American.”At the hearing, Sens. Chuck Schumer (D-NY) and Bob Menendez (D-NJ) prodded Conoco’s CEO Jim Mulva to retract this offensive comment, but he refused to do so.

Sens. Jay Rockefeller (D-WV) and Schumer urged the companies to contribute to our nation’s economic well-being by giving up these relatively modest loopholes to reduce cuts in student loans and other critical programs. They shamefully refused to play their role in America’s economic recovery.

As with nearly every Senate action, it will take a super majority of 60 votes to remove the Big Oil tax loopholes. These tax breaks have been on the chopping block several times before, but have never been eliminated. But public support for redirecting these subsidies is at a high point. Perhaps this time the will of the American public, combined with the efforts of courageous senators from both sides of the aisle, can actually overcome the tremendous power of Big Oil’s large campaign coffers and even larger propaganda machine.

Daniel J. Weiss is a Senior Fellow and the Director of Climate Strategy and Kate Gordon is Vice President for Energy Policy at American Progress.

Thanks to Valeri Vasquez, a Special Assistant on the Center’s Energy Opportunity policy team.