WATCHING WASHINGTON CLINTON'S BTU TAX: AN UNMOURNED DEATH

With Patrick Crow Facing the prospect of defeat in the Senate, President Clinton last week abandoned his unwieldy, loophole-ridden BTU tax proposal. He asked Senate and finance committee leaders to select another energy tax as long as it will raise about $50 billion during 5 years and not jeopardize passage of the administration's economic package, already passed by the House. The finance committee staff was examining a range of energy tax options, but three seemed to stand out:

June 14, 1993

3 min read

Facing the prospect of defeat in the Senate, President Clinton last week abandoned his unwieldy, loophole-ridden BTU tax proposal.

He asked Senate and finance committee leaders to select another energy tax as long as it will raise about $50 billion during 5 years and not jeopardize passage of the administration's economic package, already passed by the House.

The finance committee staff was examining a range of energy tax options, but three seemed to stand out:

Senate Majority Leader George Mitchell (D-Me.) and finance committee Chairman Daniel Patrick Moynihan (D-N.Y.) were believed to favor a 5% ad valorem tax on all forms of energy except that used in production processes.
Sen. John Breaux (D-La.) proposed an extra 7.3cts/gal transportation tax on gasoline, diesel, and jet fuel. Breaux and David Boren (D-Okla.), whose votes are crucial to the Democratic majority on the finance committee, had opposed the 572 billion BTU tax. Boren said the Breaux bill was acceptable to him.
Some administration officials reportedly favor a fuels tax increase supplemented with a tax on electrical power generation.

CLINTON'S RETREAT

Clinton retreated from the BTU tax as deftly as possible, simply inviting Senate Democrats to find an alternative. When reporters asked what fuel tax he would accept, he replied, "I don't want to get in a name game here. I'm interested in the principles of the program: deficit reduction, lower interest rates, job growth."

It was left to Treasury Sec. Lloyd Bentsen to bluntly proclaim, "There will be no so-called BTU tax." Bentsen blamed the oil industry for the defeat, saying, "Major oil companies concentrated their lobbying on oil states and representatives and senators from those states."

The American Petroleum Institute said, "If the BTU tax is dead, it will be unmourned. The American people resoundingly opposed it as unfair and counterproductive to President Clinton's goals of job creation and economic growth. They sent the Senate an unmistakable message that the BTU tax should be rejected."

Urvan Sternfels, National Petroleum Refiners Association president, said, "NPRA does not like any energy tax increases, and we're elated the BTU tax has been quickly put to rest. But the situation is very fluid, and virtually anything could be proposed."

WHAT'S NEXT

Moynihan is unlikely to begin markups in the finance committee until he has the votes for an energy tax plan.

No option will be popular. A transportation fuels tax will be battled by the trucking, barge, railroad, and airline industries, as well as citizens of Midwest and western states where gasoline is a necessity of life.

Rep. Bill Brewster (D-Okla.) warned last week, "If it is strictly a gasoline tax that hits the Midwest harder than anyone else and lets the Northeast off on its heating oil, I'm going to have a hard time voting for it."

The Clinton administration, which had only a six vote majority for the BTU tax in the House of Representatives, may have trouble reassembling the votes for an entirely different energy tax.