ENERGY TAXES STILL A THREAT IN THE U.S.

A BTU tax grudgingly passed by the U.S. House of Representatives now limps toward a House-Senate conference. It probably won't pass. For the oil and gas industry, however, the battle is far from over. The industry should take two positions as the conference committee works on a compromise in the Clinton administration's deficit reduction package. It should oppose any tax increase, not just the BTU levy. And it should counter the environmentalist claims behind so many proposed energy

July 5, 1993

3 min read

The industry should take two positions as the conference committee works on a compromise in the Clinton administration's deficit reduction package. It should oppose any tax increase, not just the BTU levy. And it should counter the environmentalist claims behind so many proposed energy taxes.

RESISTING TAXES

To oppose any proposal to raise taxes might strike the timid as extremist. But the industry has good reasons to take the antitax position.

One reason is political. The oil and gas industry looks blatantly self-serving when it opposes the BTU tax while professing support for some more-general levy. When the industry tries to straddle tax issues this way it invites outsiders to ignore what it says.

Another reason to adopt the antitax stance is that it happens to be the correct one. New taxes will not raise federal revenues overall. They will discourage economic activity and encourage tax avoidance. Even if accompanied by promised spending cuts, they will do nothing to promote future fiscal responsibility. The U.S. needs a smaller, more efficient government, not new taxes. Raising taxes will only encourage government to keep growing for its own sake and spending for the sake of public sector careers.

A conference committee deficit reduction bill devoid of new taxes is not beyond hope. Much will depend on instructions committee members receive from House and Senate leaders. Energy taxes especially have had rough sledding. The House passed its tax measures only after doubtful but politically harried members received promises that the Senate would change them. The Senate replaced the BTU tax with a 4.3 cents/gal gasoline tax hike in a package that couldn't pass without a tie-breaking vote by the vice-president. Since then, a group of Representatives has asked House leaders to remove all energy taxes from consideration.

For the oil and gas industry, however, elimination of new taxes from the conference committee bill would be a partial triumph. An energy tax that failed to pass as part of a controversial deficit reduction package might fare better on its own as a way to make Americans use less energy.

Environmentalists have convinced many Americans, including President Clinton and Vice-President Gore, that they use too much energy. They have convinced many Americans that human activity, which requires energy, ruins nature. So many Americans, including Gore and Clinton, have concluded that energy consumption must be reduced in absolute terms and that taxes are the way to do it. Blinded in the sweet mists of environmentalist virtue, such Americans ignore the hard connections between human activity, work, jobs, and energy. They blithely deny that taxes on energy consumption penalize work. Yet it's simple physics. Taxing energy destroys jobs.

CARBON TAX LATER?

An energy tax thus can never be just an environmental measure. It is in a strict environmental context, however, that an energy tax may stand its greatest chance for passage in the U.S., if not as a BTU levy now then perhaps as a carbon tax later.

Industry must remind the conference committee of the link between energy and jobs. It must show that people can work and use energy without ruining nature. And it should point to evidence suggesting that the environmentalist aim of energy taxes is what most often leads to environmental damage: systematically imposed human inactivity.