Energy Tax Proposals Focus on Targets

By Wald, Matthew L. | THE JOURNAL RECORD, February 2, 1993 | Go to article overview

Energy Tax Proposals Focus on Targets


Wald, Matthew L., THE JOURNAL RECORD


By Matthew L. Wald

N.Y. Times News Service

The energy tax being considered by the Clinton administration could reduce the budget deficit, cut oil imports and meet environmental goals. But before the administration asks Congress to approve one, it will have to decide which problems it wants cured the most, and whom it is willing to offend in the process.

Last weekend the Treasury Secretary, Lloyd Bentsen, said the administration was considering a "broad-based energy tax." Experts say that there are three practical ways to levy such a tax. First is the "B.T.U." (British thermal unit) tax, in which each unit of energy, no matter what the source, would be taxed at the same rate; second is a sales tax on the fuel used by utilities, industries and individuals; third is a "carbon tax" based on how much carbon dioxide the fuel's use creates. Other possibilities _ not so broad-based _ are taxes on oil imports and on gasoline.

Each produces a different set of winners and losers, allies and enemies. The carbon tax, for example, would hit residents of the Midwest very hard, and the oil import tax would hurt the Northeast; both would be felt much more mildly in the Pacific Northwest.

If any energy tax is enacted, consumers would pay more not just for the energy they buy directly, like gasoline or electricity. Everything has an energy component, from maple syrup, which is produced with prodigious amounts of oil, to a dentist's filling a cavity, which requires electricity for the drill.

Indeed, most people pay more for energy through the goods and services they buy than they pay directly in utility or fuel bills. In that sense, a "broad-based energy tax" could resemble a national sales tax or a value-added tax.

Picking which tax will emerge, if any, is difficult. A spokesman for the Treasury Department, Scott Dykema, said on Friday that "nothing has been ruled in and nothing has been ruled out."

But Roger Altman, deputy Treasury secretary, said in an interview with John McLaughlin, host of the television program "The McLaughlin Group", on Friday that "there are good arguments for a B.T.U. tax, and there are good arguments for an ad valorem tax." An ad valorem tax is a sales tax on energy.

"I think those two are the primary options in this area," he said.

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