Deficit may force increase in gas tax

January 13, 1993|By Karen Hosler | Karen Hosler,Washington Bureau of The Sun

WASHINGTON -- As President-elect Bill Clinton searches for ways to cut the budget deficit, invest in the economy and provide tax "fairness," keep an eye on your gasoline pump.

At both the federal and state levels, the sales tax on gasoline is an increasingly attractive answer for politicians seeking a quick infusion of cash without resorting to a broad-based rise in the income tax.

The federal government has more than tripled its gasoline tax in two big bites over the past decade, while the Maryland General Assembly has approved four separate gas tax increases over the same period.

Mr. Clinton is seriously considering including at least a modest gas tax increase in the economic package he offers to Congress next month despite his expressed opposition to raising the gas tax during the campaign.

"I think it is one of the revenue sources that is high on the list," said Rep. Benjamin L. Cardin, a Baltimore Democrat who serves on the House Ways and Means Committee.

In the past, gasoline tax revenues have usually been earmarked specifically for transportation programs.

But a precedent was set by Congress in 1990 when half a 5-cent-per-gallon increase was allocated to reducing the federal deficit.

An environmental lobbyist with ties to the Clinton transition team predicted yesterday Mr. Clinton would propose a 20-cent-per-gallon gasoline tax increase over four years.

Half the money would go to deficit reduction, he said, and the rest would be dedicated to cutting the Social Security payroll tax and thus qualify as a middle-income tax cut.

"I really feel that something is going to be done along these lines," said William F. Zorzi, Sr., a spokesman for the Mid-Atlantic branch of the American Automobile Association. "We would be happier if they would dedicate it to infrastructure."

Mr. Clinton doesn't much like the gasoline tax, which he considers an unfair burden on the poor because it hits everyone equally, regardless of ability to pay. During the campaign, he criticized independent presidential candidate Ross Perot's proposal to increase the federal gas tax by 50 cents over five years.

But the president-elect is finding himself propelled toward a gas tax increase just as his predecessors, Ronald Reagan and George Bush, were before him. A penny a gallon increase raises nearly $1 billion and, as tax increases go, it is a relatively easy one to sell.

"People feel better about a gas tax increase than an income tax because they can control it by controlling consumption," said Frederick Hutchinson, a tax analyst for the Center on Budget and Policy Priorities. "No one wants to control their income that way."

The House's three top Democratic leaders on tax policy, Speaker Thomas S. Foley of Washington, Majority Leader Richard A. Gephardt of Missouri, and Ways and Means Committee Chairman Dan Rostenkowski of Illinois, all strongly support a gasoline tax increase because, they say, it can be justified on environmental grounds.

At a rate of 14 cents per gallon, the U.S. federal gas tax is among the lowest in the industrialized world. By contrast, Japan and the countries of Western Europe charge between $2 and $4 per gallon.

Senate Majority Leader George J. Mitchell of Maine said in a television interview Sunday that he also believes that "over time an increase in the gasoline tax makes sense from an energy, a national security and revenue point of view."

But like Mr. Clinton, Mr. Mitchell said he is wary of approving a "substantial" gasoline tax increase this year while the economic is still in shaky recovery.

When voters are asked what they consider the best options for raising money to cut the deficit, they overwhelming choose raising taxes on the wealthy, and Mr. Clinton is virtually certain to oblige.

As he promised during his election campaign, Mr. Clinton is expected to propose both a tax rate increase on families earning more than $200,000 and an additional surtax on millionaires.

But that won't yield anywhere near enough money to meet his ambitious goals of cutting the deficit by $145 billion over four years while also investing in social programs for long-term growth.

Voters also find the so-called sin taxes on alcohol, tobacco and luxury items a relatively palatable source of government funds. And while governments turn to them often, these taxes don't raise much either.

The gasoline tax is by no means popular or easy to pass, especially in the Senate, where senators from Western states complain that the burden of a gas tax falls unfairly on those who have to drive great distances.

Sen. Lloyd Bentsen, the Finance Committee chairman named by Mr. Clinton as treasury secretary, would often counter gas tax increase proposals with a substitute to raise fees on oil imports -- a boon to the domestic oil industry in his home state of Texas but an anathema to Northeasterners who rely on home heating oil.

The National Governors Association, which Mr. Clinton once chaired, also strongly resents the federal government using gasoline tax revenues for anything other than transportation projects, from which the states benefit.

As with all the tough decisions this year, it will be up to Mr. Clinton to settle the feud and provide political cover for his Democratic colleagues by making a strong pitch for a gas tax increase as part of a broader package.

"My hope would be that we could fashion a deficit reduction package and an investment package without having to resort to that," Rep. Leon E. Panetta, Mr. Clinton's choice for budget director, said at his confirmation hearing Monday.

"But I think you can only make that decision at the end of the line . . . because the bottom line is that you clearly want to hit your deficit reduction target."

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