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1 Arthur P. Hall, The Taxation of Energy in the U.S.: Who Pays 1 (1994)

handle is hein.taxfoundation/srcjxz0001 and id is 1 raw text is: 1A FOUNDATION March 1994 Number 29 The Taxation of Energy in the U.S.: Who Pays? Govermnents at all levels in the United States have become increasingly interested in using energy consumption as a tax base, as the escalating tao burden depicted in Figure 1 shows. The Clinton administration's unsuccessful proposal for a tax based on British Thermal I nits (or BTtJs) in its fiscal year 1994 budget received high-profile attention and opposition. In the end, Congress instead passed Figure 1 Total Energy-Related Excise Taxes, 1950-1994 (Constant 1993 Dollars) 80 - H State El Federal 70 - State plus P.- 60 - Federal 50 - 40 0 30 0 '50 '53 '56 '59 '62 '65 '68 '71 '74 '77 '80 '83 '86 '89 '92 Source: Tax Foundation, a gasoline tax increase of 4.3 cents per gallon. Thirteen states followed this example - continuing a trend that began in 1990 - and enacted higher gasoline tax rates for fiscal year 1994. Furthermore, not including the more than $200 million in motor fuel tax increases, $160.6 million (3.9 percent) of all state tax increases enacted for fiscal year 1994 were energy-related taxes. The interest in energy taxes typically couples a perceived need for greater tax revenue with arguments about the need for greater energy conservation and environmental protection. These arguments have continued despite the sparse amount of information about the total amount of energy-related taxes Americans already pay. Table I breaks down the various categories of energy-related taxes and the 1993 tax burden for each category by income class. .(Table 4 shows the totals for each state.) The categories are arranged according to state- and federal-level taxes. Table 2 shows the 1993 per-household burden of each category of energy-related taxes according to income group. (The side bar on page 10 provides definitions for the various tax categories.) Tax Incidence: Understanding Who Bears the Economic Burden of Energy Taxes Tax incidence analysis seeks to discover who bears the real economic burden of a tax. The analysis focuses, therefore, on direct taxes as well as indirect taxes. That is, it investigates whose income is reduced through the indirect taxation of goods and services or the taxation of business entities. In a market economy, a person or institution that pays the government money as the result of By Arthur P Hall, Ph.D. Senior Economist Tax Foundation AL

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