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37 Tax Features 1 (1993)

handle is hein.tera/taxfeaturs0037 and id is 1 raw text is: TAXf 46 FOUNDATION TAX February 1993 Volume 37, Number 1 President Bill Clinton in his address to the Congress presented the nation with massive tax increases - a net increase of $245 billion over 5 years. This comes at a time when American taxpayers are already shouldering the heaviest tax burden in U.S. history. The biggest departure from current tax policy is the proposal of a broad-based energy tax based on British thermal units, or BTUs. (A BTU measures the quantity of heat needed to increase the temperature of one pound of water by one degree Fahrenheit when water is at or near 39.2 degrees. Different forms of energy have different costs to consumers per BTI. BTUs are a convenient way to determine a tax base across sources of energy that would otherwise be difficult to compare.) The BTU tax is slated to raise over $71 billion between 1994 and 1998. The true burden from a BTU tax is generally hidden from con- sumers and investors. Therefore, once intro- duced, it will likely prove very easy to increase further in the fuiture. The greatest risk from a BTU tax, therefore, may be from future tax increases. The table at the right shows the breakdown of the tax burden, by household income, stemming from a BTU tax. Lower-income households clearly bear a proportionally greater burden from this tax. The BTU tax will cause a regional imbalance as well because energy consumption varies across the country. According to Department of Energy data, residents of western south central states will pay twice as much as taxpayers in most other areas of the country. One-Two Punch? Only the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) is comparable in size to the Clinton Plan. However, TEFRA had the virtue of coming on the heels of the Economic Recovery Tax Act of 1981 (ERTA), by far the largest tax reduction in U.S. history. ERTA cut taxes 11.6 Clinton Tax Plan continued on page 3 Dan Rostenkowski Chairman, House Committee on Ways and Means 4-5 FROT

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