Energy-Intensive Industries Seek Break from Tax

By James R. Owen and Marcia Stepanek | THE JOURNAL RECORD, April 13, 1993 | Go to article overview

Energy-Intensive Industries Seek Break from Tax


James R. Owen and Marcia Stepanek, THE JOURNAL RECORD


WASHINGTON _ When aluminum got passed over by the White House earlier this month for a break on President Clinton's new energy tax hike proposal, industry lobbyist Stevenson Walker called an old friend _ White House Chief of Staff Thomas "Mack" McLarty.

Within a few days, Walker, the top lobbyist for America's No. 2 aluminum maker, Reynolds Metals, was in McLarty's office, urging the administration to give his energy-thirsty industry a break, too.

Accompanied by Reynolds Chief Executive Officer Richard Holder during a 20-minute meeting, Walker told McLarty that if the aluminum industry had to pay the new tax, company costs would skyrocket and some 24,000 aluminum workers might have to be laid off. McLarty made no promises, but said he would convey Holder's concerns to Treasury Secretary Lloyd Bentsen.

Walker and other aluminum executives aren't the only people from energy-intensive industries pleading for a break from the proposed tax, which is the second-biggest source of new money in President Clinton's overall, five-year plan to fix the economy.

The Treasury Department handed out exemptions to the tax April 1, cutting the proposed levy on heating oil and eliminating it for jet fuel used for international flights; grain-based gasoline additives such as ethanol also were exempted.

Some industries which weren't given a break _ like steel, glass and paper _ have begun to ask for similar exemptions.

Lawmakers whose districts include large aluminum smelters, steel and paper mills are getting in the act.

For example, a dozen House members, including Speaker Thomas Foley of Washington state, recently wrote Treasury Secretary Lloyd Bentsen outlining the aluminum industry's case for an exemption. Foley has a large Kaiser Aluminum smelter in his district with 1,160 employees.

The rallying cries for exemptions illustrates the politically tough choices the administration faces in crafting a way to raise money to ease the federal budget deficit while at the same time trying to avoid measures that would cost jobs and dampen the economy.

The stakes are high: Aluminum-makers say the proposed new tax would drive up the industry's annual production costs by as much as $179 million, or 12 percent.

Because they spend one-third of their annual production outlay on energy, aluminum companies say the tax would hit them harder than most other industries. And with the market glutted by a recent surge of Russian-made aluminum, the world price for aluminum is at record lows at a time when world demand is relatively weak.

"The energy tax could be the straw to break the camel's back for the industry," said Walker, "and cause plants to shut up and go overseas, costing jobs."

Last year, Reynolds lost money on its smelting operations, as did Pittsburgh-based Alcoa, the industry leader.

White House economists acknowledge the proposed energy tax demands some tough sacrifices of industries, and is encouraging many of them to pass the cost of the tax to consumers in the form of higher prices. …

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