Energy Tax Would Not Meet US Needs Imposing Taxes to Force Americans to Use Less Energy Won't Wring out Waste, but It Will Result in Less-Productive Industries

By Charles J. DiBona. Charles J. DiBona is the president of the American Petroleum Institute . | The Christian Science Monitor, April 7, 1993 | Go to article overview

Energy Tax Would Not Meet US Needs Imposing Taxes to Force Americans to Use Less Energy Won't Wring out Waste, but It Will Result in Less-Productive Industries


Charles J. DiBona. Charles J. DiBona is the president of the American Petroleum Institute ., The Christian Science Monitor


THE Clinton administration deserves support for taking action to reduce the deficit. However, its deficit package is far from perfect. It includes a broad-based energy tax that will harm the economy - and won't much help conservation, the environment, or energy security. If more taxes are needed, a value added tax on a wide range of products makes much more sense. The economy and deficit

In 1997, with the energy tax fully in place, Americans will pay almost $33 billion in new taxes. They will pay more for fuel to heat their homes, power their cars, and operate their businesses - and also more for goods and services made with energy.

The total tax will average about $475 a year for every four people, with some families spending considerably more. That much less will be available to spend on food, housing, medicine, education, and everything else. In turn, businesses will sell less and employ fewer people. And since foreign firms won't pay the tax, United States companies will find it tougher to compete, forcing further job cuts. The impact will be severe on such industries as airlines, trucking, agriculture, steel, aluminum, rubber, and glass.

A recent study by DRI-McGraw Hill shows that by 1998 - less than one year after the tax is fully implemented - about 400,000 jobs will be lost.

And with those people out of work, the government will receive less in income and payroll taxes and pay out more in unemployment benefits. The administration also plans to spend almost $4 billion on food stamps and earned income credits to ease the tax's pain on the poor.

As a result, just a little more than half of the $33 billion collected will actually be available to reduce the deficit. The administration currently says that reducing the deficit will lower interest rates, improving people's finances. But this will provide little comfort to those unemployed - especially since another tax could have cut the deficit without nearly the pain in lost jobs. Conservation

Laura D'Andrea Tyson, head of the administration's Council of Economic Advisors, says that the energy tax is primarily "a conservation measure" and "not ... a revenue-raiser." And it is through conservation that the administration hopes to significantly cut oil imports and improve the environment.

But the administration's own figures show that conservation will be minimal. Consider the tax's impact on the consumption of oil - where most conservation might be expected, with oil taxes at a discriminatory 2 1/3 times the rate of any other kind of energy. …

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