BTU tax could make a comeback
9/13/2000 12:00:00 AM - Bruce Bartlett
In recent days, there have been widespread protests throughout Europe by drivers angry at skyrocketing fuel prices. While the cause of the price spike may lie with OPEC and the falling Euro, the new European currency, high gasoline taxes have gotten the blame. That is because taxes routinely account for 80 percent or more of the price of gasoline at the pump. The result has been a tax revolt throughout Europe. Says David Ignatius of the Washington Post, "Not since the Boston Tea Party have tax-cutters shown this kind of militancy."
Should Al Gore become the next president, American drivers may soon find themselves joining the tax revolt. The fact is that Gore has long supported higher energy prices as key to implementing his environmental agenda. And his surplus-busting budget plans virtually guarantee big tax increases under a Gore administration.
Recall that back in 1993, the Clinton administration put forward a broad-based energy tax as part of its deficit reduction package. The tax would have been assessed on the energy content of all fossil fuels, including oil, natural gas and coal. It would have raised the price of gasoline by 7.5 cents per gallon, as well as prices for electricity and home heating oil. An Energy Department analysis estimated that the BTU tax, as it was called, would have taken $320 per year out of the pockets of a typical family.
The BTU tax was wildly unpopular, even among Democrats, because it was a highly regressive tax, taking more from the poor than the rich in percentage terms. Yet, it was key to the Clinton administration's program because it raised so much revenue -- $22 billion per year according to the Treasury and $33 billion according to private economists such as former Energy Secretary James Schlesinger. If the latter figure was correct, then the typical family's fuel bill would have risen by $500 per year.
According to Bob Woodward's authoritative account in "The Agenda," Al Gore "virtually designed" the BTU tax, and "spearheaded the fight" for it. He fought for it despite deep misgivings about its complexity and economic impact within the Clinton administration. Treasury Secretary Lloyd Bentsen is reported to have considered the tax to be "an administrative and political nightmare," and opposed it being in the budget package. White House adviser Paul Begala thought the BTU tax was a political loser. "Taxes for deficit reduction is something for nothing," he said.
Yet, according to Woodward, Bill Clinton stuck with the BTU tax long after he developed his own misgivings about the proposal largely because of Al Gore's strenuous support for it. Gore even belittled Democratic senators who tried to tell the White House that the votes simply weren't there to pass the BTU tax. In a meeting with Senator John Breaux, Louisiana Democrat, Gore berated him for bringing the bad news. Gore repeatedly asked whether Breaux was going to "screw" and "betray" the administration on the BTU tax.
Finally, Senator Daniel Patrick Moynihan (D-NY), chairman of the tax-writing Senate Finance Committee, was brought in to a White House meeting to tell Gore that the BTU tax was dead. He would not even be able to get the tax reported out of his committee, and prospects for passage in the full Senate were even worse. Soon thereafter, the White House dropped its support for the tax. Yet, to the bitter end, Gore fought for it as essential for the environment.
Of course, Gore has not suggested reviving the BTU tax should he become president. But it is very doubtful, given his obsession with the environment, that he has given up hope of enacting such a tax. And he might well get the opportunity if his spending plans are enacted. According to a careful study recently done by the Senate Budget Committee staff, Gore's announced proposals would increase federal spending by between $3.4 trillion and $4.3 trillion over the next 10 years.
Thus, Gore will consume more than 100 percent of the non-Social Security surplus even at the low range of the estimate. At the high end, he would also consume more than half the surplus that both parties agree should be set aside for Social Security. His claims to the contrary are so ludicrous, in fact, that even the liberal Washington Post questions how he can say that he is setting aside one-sixth of the non-Social Security surplus for debt reduction.
The Post also points out that new spending programs, such as those Gore is proposing, will be very difficult to cut once enacted. "Unfortunately, government programs, once introduced often prove impossible to get rid of, even when they have long outlived their usefulness," it editorialized on Sept. 9. The Post chided Gore for not proposing a single spending cut in his entire 191-page economic blueprint.
This brings us back to the BTU tax. Should Gore discover that his budget plans are indeed excessive, jeopardizing the surplus and perhaps even bringing back deficits, how likely is it that he will slash his own programs? Not very. It is a virtual certainty that should there be a need for fiscal tightening under a Gore administration, the heaviest burden will fall on higher taxes, not lower spending. And a broad-based energy tax would be a very potent revenue-raiser indeed.
This is not to say that Gore deliberately plans to blow the surplus to pieces just so he can finally get the BTU tax he wanted so badly in 1993. On the other hand, it is hard to believe, given Gore's environmental extremism, that he would permanently forego any use of tax policy to implement his environmental agenda. This suggests that we may not have seen the last of the BTU tax, should Al Gore be victorious in November.