About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

117 IRET Byline 1 (1993)

handle is hein.taxfoundation/iretbyln0117 and id is 1 raw text is: May 3, 1993 No. 117 Clinton's Btu Tax: All Costs, No Benefits As part of his deficit reduction package President Clinton is proposing a Btu (British thermal unit) tax, based on the heat generating capacity of different fuels. The stated purposes of the tax are to raise revenue for deficit reduction, encourage energy independence, and promote environmental quality. In reality the tax would penalize the consumption and production of all forms of energy adverse consequences for every U.S. citizen. While the costs of this measure would certainly be heavy and widespread, the benefits to society are likely to be non- existent. The Btu tax would impose penalties on the use of all energy sources with a disproportionately heavy penalty on the use of oil. The basic rate applied to most fuels and would have There is a trade the growth of and economic proposing the President C1 indicated he former to the would be 25.7 cents per million Btu's. There would be an additional 34.2 cents per million Btu's generated by oil based fuels, with an exception for residential home heating oil which would be taxed at the lower 25.7 cents. In terms of the per unit effect of the tax on major fuels, the Btu tax would translate into $5.57 per short ton of coal, $.26 per mcf (million cubic feet) of natural gas, $1.50 per barrel of oil used for home heating oil, and $3.24 per barrel of oil used for refined petroleum products such as gasoline. These rates IRET Byin preJers ta the tHer. The increase in production costs generated by the tax would result not only in higher prices for goods and services but also in overall reductions in productive output. Again, contrary to Secretary Bentsen, higher production costs would translate into a reduced demand for labor and capital services with adverse consequences for the overall unemployment rate and the rate of growth in individual and family incomes. Furthermore, to the extent a reduction in energy inputs causes labor to be less productive, there would be additional adverse consequences for wage rates. Institute for Research on the Economics of Taxation would be phased in, in equal annual increments, between July 1, 1994, and January 1, 1998. Beginning in 1998, they would be indexed to the inflation rate, virtually guaranteeing annual increases in the tax. The Economic Impact This energy tax.. .is... important... to reduce the deficit, create the conditions to restore long term growth to our economy, and create the jobs and income growth Americans want. (Treasury Secretary Lloyd Bentsen, 4/20/93) Contrary to Secretary Bentsen's assertion, the economic effects of the Btu taxes would all be negative. Energy is an essential input into every production process and the operation of every household. As such, the Btu tax would raise everyone's cost of living both directly and indirectly, without regard to income. The prices that people pay for heating and cooling their homes, operating their electrical appliances, and driving their cars would all go up. Beyond the direct increase in energy costs, the Btu tax would -off between result in higher prices than government otherwise would be experienced for growth. By every product on the market. This is because the production of every inton has good and service in the economy requires energy as an input. IRET is a non-profit, tax exempt 501(c)(3) economic policy research and educational organization devoted to informing the public about policies that will promote economic growth and efficient operation of the free market economy. 1331 Pennsylvania Ave., N.W., Suite 515, Washington, D.C. 20004 Phone: (202) 347-9570

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most