MERITS OF INCREASED U.S. ENERGY TAXES AT ISSUE

President Clinton says he has not decided whether to seek a broad based U.S. energy tax or any other form of energy taxes. Clinton, as he signed an order establishing a National Economic Council last week, told reporters, "We have a lot of options under consideration, but no decision has been made" on energy taxes. Any taxes would be part of a legislative package designed to help the U.S. economy and reduce the federal budget deficit. The Clinton administration has pledged that the economic

Feb. 2, 1993

4 min read

President Clinton says he has not decided whether to seek a broad based U.S. energy tax or any other form of energy taxes.

Clinton, as he signed an order establishing a National Economic Council last week, told reporters, "We have a lot of options under consideration, but no decision has been made" on energy taxes.

Any taxes would be part of a legislative package designed to help the U.S. economy and reduce the federal budget deficit. The Clinton administration has pledged that the economic package will be fair to the middle class.

A broad based energy tax would be tied to the sales price of fuel, not to its heating value or carbon content.

WHAT'S BEING CONSIDERED

Earlier, Treasury Sec. Lloyd Bentsen disclosed the Clinton administration is weighing the merits of a wide range of consumption taxes.

Bentsen said, "A broad based energy tax is certainly one of those that is on the table as an option to be considered because it does a couple of things.

"One, it raises revenue. On the other point, it helps lead to some environmental objectives that we're trying to bring about by conservation of energy. At the present time, we're importing almost $1 billion/week in oil, and that certainly adds to our trade deficit."

The Treasury secretary said, "What you're seeing in every other major industrial country of the world (is) more conservation practices, insofar as taxes added to energy, than we're doing in this country."

Bentsen said Clinton is likely to reveal his economic policy package by mid-February. That might occur in connection with Clinton's planned State of the Union address Feb. 17.

The Congressional Budget Office estimates a 5% sales tax on all forms of energy would garner $18 billion/year for the government.

CBO also reported last week the federal budget deficit amounted to $290 billion in fiscal 1992, will rise to $310 billion in fiscal 1993 ending next Sept. 30, and climb to $357 billion by fiscal 1998.

TAX DEBATE

A number of congressmen quickly objected to the concept of broader energy taxes.

Sens. Sam Nunn (D-Ga.), David Boren (D-Okla.), Pete Domenici (RN.M.), and John Danforth (R-Mo.) said the goal of energy taxes should be to encourage conservation, not raise revenues.

But Sen. Daniel P. Moynihan (D-N.Y.), chairman of the tax writing Senate finance committee, said "an energy tax is in order" as long as it does not apply only to gasoline.

Charles DiBona, American Petroleum Institute president, said, "Everyone wants to see a stronger economy and a reduction in the deficit. The imposition of a broad based energy tax, however, would impose significant, harmful, and inequitable costs on the U.S. economy just as it is beginning to recover.

"Since energy and economic growth are related, that would defeat President Clinton's top goal of reviving America's economic growth and indeed would exacerbate the deficit problem."

He said higher energy taxes would disproportionately harm low income consumers, regions of the country where industries and individuals use more energy, and the international competitiveness of American made goods.

DiBona said the administration first should make significant cuts in the growth rate of federal spending, and then, if taxes also are needed, consider a broad based consumption tax like a European style value added tax.

Nicholas Bush, Natural Gas Supply Association president, also opposed energy taxes for those reasons.

He said ff any tax is placed on natural gas, it is best applied at the point of consumption. "To do otherwise, through a broad based BTU tax or carbon tax, acts as a disincentive to production."

Bush also said, "Constant changes to the nation's tax code disadvantage industry.

"Producers operate on a long term investment horizon. It takes years, for instance, to bring new natural gas wells on line. Similarly, industries installing new energy using equipment must anticipate using it for 20-30 years."

OIL IMPORT FEE

Meanwhile, the chairmen of three large independent oil firms urged Clinton to adopt a U.S. oil import fee.

Forrest Hoglund of Enron Oil & Gas Co., George Mitchell of Mitchell Energy & Development Corp., and Raymond Plank of Apache Corp. said an energy security fee on imported oil and petroleum products is a better alternative than higher gasoline taxes or a BTU tax. They noted the latter would penalize natural gas, which is the preferred fuel for environmental reasons, and a gasoline tax would place a disproportionate burden on the poor and consumers who depend on cars for transportation.

Plank said he and other independents would reinvest their added revenues from the oil import fee into U.S. exploration and development.

The executives noted that foreign oil producers are not subject to the same environmental costs and regulations as U.S. producers, and an oil import fee would help level the playing field.