Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, April 2, 1993 TAG: 9304020269
SECTION: BUSINESS PAGE: A-7 EDITION: METRO
SOURCE: Los Angeles Times
DATELINE: WASHINGTON LENGTH: Medium
ENERGY TAX BURDEN SHIFTING
The Clinton administration, pressed by powerful interest groups, said Thursday that it has restructured its energy tax to reduce the impact on selected industries and shift the burden more directly to consumers.In its first detailed discussion of the controversial tax, the administration disclosed it has granted exemptions to a wide array of industries that have lobbied furiously for special treatment.
After initially insisting the tax - one of the biggest revenue-raisers in Clinton's long-term economic package - would be levied as close to the source of energy production as possible, the administration said Thursday it will seek to impose the tax closer to consumers.
For example, instead of having natural-gas producers or pipeline operators pay the tax, it will be paid by utility companies at "the city gates," after the fuel has been transported across the country.
The administration always conceded its energy tax would hit middle-income Americans harder than any of its other tax proposals. Now, officials acknowledge the latest changes make it more likely the tax will be passed on directly to individual consumers.
"If the tax is to effectively promote energy conservation, it must be borne by the ultimate consumer," Treasury Secretary Lloyd Bentsen said in a statement. "The administration is continuing to explore methods of assuring that the tax is in fact passed through to those who use the energy."
Yet the decision to hit consumers more directly also means that less of the burden will be borne by businesses in highly competitive industries that otherwise might be forced to absorb the cost of the tax to keep prices down.
The administration is proposing to remove certain tax credits from utilities in states where regulators don't let them fully pass through the costs to ratepayers. That seems to guarantee most consumers will see a new charge on electric bills for the energy tax.
Some industries have been exempted from the tax altogether, including petrochemical firms and plastic makers that use crude oil as a raw material; steelmakers that use coal and coke in steel production; international airlines that use jet fuel; and producers of ethanol, methanol and other alternative fuels. In California, oil producers that use natural gas to help extract heavy oil from wells also will get an exemption.
In addition, the administration said it is proposing to "index" the energy tax to account for inflation, beginning in 1998. That means the levy would automatically increase over time to keep pace with living costs, ensuring that the government can count on the tax as a major source of revenue far into the future. If approved by Congress, the energy tax would go into effect July 1, 1994.
When it first announced the broad outlines of its energy tax proposal in its economic plan in February, the administration said that the tax would raise $70 billion from 1994 to 1998, and would be a major component of the long-range deficit-reduction program.
Thursday, the administration refused to provide updated revenue estimates for the energy tax, saying only that it will still raise close to the $70 billion projection. Yet officials wouldn't say how much the newly approved industrial exemptions would cost the government. "Obviously, the exemptions cost money," one Treasury Department official acknowledged.