Raise the Gasoline Tax

Boosting the tax by 15 cents a gallon would meet Clinton's budget goals

CONGRESS is confronted with the task of making a decision on energy taxes. The Clinton administration is backing away from a broad-based Btu tax that would increase the cost of most types of energy. This proposal has aroused opposition from energy producers, manufactures, utilities, exporters, and consumers. Sen. J. Bennett Johnston (D) of Louisiana, chairman of the Energy Committee, and Sen. David L. Boren (D) of Oklahoma, a member of the Finance Committee, have proposed replacing the Btu tax with a mod est gasoline tax increase. This alternative would serve the national interest far better than President Clinton's program.

The Btu tax would harm domestic producers of oil, natural gas, coal, and electricity. It would increase the cost of virtually all manufactured products, thereby undermining US competitiveness in the international marketplace. It has been estimated that several hundred thousand jobs would be lost to foreign competitors. This result would be at cross-purpose with Mr. Clinton's professed goals of stimulating the economy and creating new jobs. The Btu tax would do little to improve the environment. It would be costly to administer. The majority of Americans oppose this tax.

In the peculiar logic of politics, the almost universal harmfulness of the Btu tax has been converted into a virtue. It provides almost limitless opportunities to gain favor with constituencies by exempting them from the full impact of the tax.

The White House and some key players in the Congress have vied with each other in the endeavor to curry goodwill by granting such exemptions. Mr. Clinton's political advisers were astute enough to recognize that he could restore strength to his flagging popularity by announcing that he had decided to cancel the Btu tax altogether.

The US Treasury estimates that revenue from the Btu tax over the first five years would total about $70 billion to $75 billion. A 15-cents-per-gallon gasoline tax increase also would generate about $75 billion over five years. In contrast to the harmful impact of the Btu levy, the gasoline tax would have many beneficial consequences.

Even though a tax of 15 cents per gallon is very modest, it would provide some incentive for car and truck owners to switch to more fuel-efficient vehicles or to vehicles powered with non-taxed fuels, such as compressed natural gas. Fleet operators, who are major users of transportation fuels, are likely to be particularly receptive to implementing such cost-saving procedures.

The auto industry would be a major beneficiary from this development. Demand for more fuel-efficient or alternatively fueled vehicles would increase by a significant amount for many years. Employment in this industry and its suppliers would increase. Investments in producing alternatively fueled vehicles would be stepped up. The impact on the economy would be positive.

By encouraging the increased use of compressed natural gas (CNG) as a vehicle fuel, the gasoline tax would give a boost to all sectors of the natural gas business. It would stimulate natural gas resources; the following states would experience improved economic prospects: Texas, Alaska, Oklahoma, Louisiana, New Mexico, Kansas, Wyoming, Colorado, California, West Virginia, Arkansas, and Utah. To accelerate the switch to natural-gas-powered vehicles, these states could increase their local gasoline taxes a nd use some of the proceeds to help put in place the infrastructure of filling stations to service those vehicles. This action would revitalize the domestic petroleum industry and bring renewed prosperity to these states.

The mechanism for collecting gasoline taxes is already in place, so the proposed increase in this levy would involve minimum cost or administrative overhead. Virtually all the proceeds could be used for deficit reduction. Moreover, the positive impact of the gasoline tax on the economy would increase federal revenues from higher personal income and greater corporate profits. These additional revenues might be as large as the direct collections from the gasoline tax.

The shift to more fuel-efficient and CNG powered vehicles would be more beneficial to the environment than the Btu tax.

The average car owner uses about 500 gallons of gasoline a year. The proposed tax levy would raise his annual spending on gasoline by $75. This modest cost would bring many economic and financial benefits.

The case for the proposed action is so compelling that it is unfortunate to label this measure a "tax." It would be more appropriate for the American people to think of the gasoline tax as a lucrative investment that will bring large returns in terms of a cleaner environment, greater energy security, revitalized domestic petroleum and automobile industries, the creation of new jobs, and the strengthening of government finance. Each dollar of gasoline tax will generate several dollars of benefits. It is t he best energy tax option.

A gasoline-tax increase would be well received by financial markets. Many business executives and economists have publicly stated support for such action. A recent Harris poll revealed that a majority of respondents favored raising the gasoline tax by 15 cents a gallon. This stands in marked contrast to the negative response to the Btu tax, which was opposed by 62 percent of the participants in a recent Wall Street Journal/NBC poll.

Governments in Western Europe and the Far East levy gasoline taxes ranging from $2 to $4 per gallon. In contrast, the US has the lowest gasoline tax in the industrial world. The federal government collects 14 cents and states levy an average of 20 cents per gallon.

If the federal tax were raised 15 cents a gallon, the total would still be far below the level prevailing elsewhere. Once accustomed to higher gasoline taxes, Americans may decide to emulate the rest of the world and gain the many advantages that would follow a much more substantial gasoline tax increase.

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