AUGUSTA – The Senate Finance Committee has recommended a $59.9 billion, five-year package that includes tax cuts and new revenues, including a provision written by Sen. Olympia Snowe to increase taxes on large oil companies that would generate an estimated $4.9 billion.

“At a time of unprecedented profits, I do not believe it is appropriate for the petroleum industry to continue to receive beneficial tax treatment when the average family in Maine and America is struggling to afford their energy bills,” the Maine Republican said.

The proposal would prevent oil companies with revenues in excess of $1 billion in 2005 from using a preferential accounting method for their oil inventory. Put another way, Snowe said, the proposal would scale back a tax provision that allows oil companies to take an enormous tax deduction when prices are sky-high.

Some senators on the committee, however, raised a concern over the provision because it changes an accounting method the oil companies have used for 70 years. They also argued that it would be counterproductive to punish the companies while at the same time asking them to increase oil production. But Sen. Charles Grassley, R-Iowa, the chairman of the committee, defended the change as doing away with a preferential tax treatment for one industry.

Snowe blocked consideration of the initial Grassley plan last week, arguing that the package of tax cuts, worth $78.1 billion over five years, was too large.

Snowe cited budget deficits, rebuilding efforts in the aftermath of devastating hurricanes, ongoing operations in Iraq and rising energy costs as reasons for reducing the size of the proposal.

That set up a series of private negotiations among Republican members of the committee that led to Tuesday’s agreement.

While acknowledging that the new plan was an improvement, Sen. Kent Conrad, D-N.D., remained concerned that the package of tax cuts did not include provisions to pay for itself entirely.

“I think we should pay for all of it,” he said. “I know that is a novel idea around here, to actually pay for something.”

Conrad offered a Democratic alternative that would have paid for the continued tax cut provisions by increasing taxes on the wealthiest taxpayers. It failed on a party line vote.

The latest GOP plan would renew a number of soon-to-expire tax breaks, including investment incentives for small businesses, a tuition deduction, a business research and development credit, and a deduction for teachers who buy their own classroom supplies.

The proposal also includes $30.5 billion in tax relief from the alternative minimum tax, which because of the effects of inflation has been increasingly affecting middle class taxpayers. The AMT was designed to make sure the wealthy could not avoid paying taxes, but it has been affecting a growing number of far from wealthy taxpayers every year.

“It’s a stealth tax, a sneaky tax,” said Sen. Susan Collins, R-Maine. “I think it is imperative we have relief from the alternative minimum tax.”

The legislation also provides $7 billion in tax cuts over five years to spur rebuilding of the Gulf Coast. And it adds provisions designed to spur more charitable contributions by individual taxpayers. Among them is one that would allow taxpayers who do not itemize their deductions to take a deduction for charitable contributions of up to $420 a year for a married couple filing jointly.

Endorsed 14-6 by the Senate Finance Committee, the proposal is expected to pass in the Senate.

Both Snowe and Collins cautioned, however, that the battle over taxes and spending is far from over as any differences between the House and Senate versions of the tax bill will have to be worked out in a conference committee.

Republicans in the House, for instance, are still pushing to extend tax breaks for capital gains and dividends beyond their 2008 expiration. Without the change, the 15 percent maximum tax rate on investment income would increase to 20 percent in 2009. Lawmakers are contemplating paying for the tax breaks by reducing services in areas such as foster care, Medicaid, food stamps and Temporary Assistance for Needy Families.

“The House version is very different in many respects,” said Collins. “I am very much opposed to the cuts in the House bill that would impact low-income families in Maine and throughout the country.”