Bentsen hints at broad increase in energy taxes Goal is to slash federal deficit

January 25, 1993|By Robert A. Rankin | Robert A. Rankin,Knight-Ridder News Service The New York Times News Service contributed to this article.

WASHINGTON -- Treasury Secretary Lloyd Bentsen hinted strongly yesterday that President Clinton will propose raising taxes on all forms of energy -- including gasoline, oil, coal, natural gas and electricity -- as part of his economic program.

Mr. Bentsen also all but buried any lingering hope that Mr. Clinton will cut taxes for the middle class, and he also played down expectations for expanded tax breaks for Individual Retirement Accounts, a cause he championed as a senator.

Speaking on NBC's "Meet the Press," Mr. Bentsen left no doubt that Mr. Clinton's most important economic goal is to reduce the mammoth federal budget deficit and stressed that an important element of that effort will be raising taxes on consumption.

President George Bush, in his final budget, projected that the shortfall will hit a record $327 billion in fiscal 1993, which ends Sept. 30.

The treasury secretary dismissed the idea of a national sales tax but said proposals to increase taxes on Social Security and Medicare benefits remain "on the table," as do proposals to raise excise taxes on sales of tobacco and alcohol.

In addition, he reaffirmed that the income tax rate on families making more than $200,000 "will go up," but he declined to say if it might rise higher than the 36 percent target Mr. Clinton cited during his campaign. The top rate now is 31 percent.

Asked if Congress and the nation are ready to accept higher taxes, Mr. Bentsen said: "I think the American public is ready for what it takes to get away from this deficit financing, to get our economy moving again, to encourage savings for investment and the creation of jobs."

A broad-based energy tax "raises revenue" and also helps the United States reduce air pollution and dependence on foreign oil by inducing consumers to conserve fuel, Mr. Bentsen said.

When a questioner noted that such energy taxes would raise prices on everything from gasoline to home heating fuel, Mr. Bentsen responded that "every other major industrial country in the world" charges higher energy taxes than the United States to encourage conservation.

Despite his clear tilt toward favoring a broad-based energy tax, Mr. Bentsen was careful to say that the president's economic team has made no final decisions on an energy tax.

A 5 percent tax on the value of all energy -- including coal, petroleum, natural gas, hydroelectricity and nuclear power -- would raise an average of $18 billion a year, according to the Congressional Budget Office.

In contrast, each penny of gasoline tax raises almost $1 billion a year, while a 5 percent retail-sales tax could rake in $90 billion in fiscal 1994 and roughly $511 billion through 1997, the CBO estimates.

For a family spending $100 a month in utility bills and $60 for gasoline, a 5 percent increase in fuel costs would total $8 each month. In addition, the prices of many products and services, like air travel, would rise as the higher cost of fuel was passed along to consumers.

Sen. Daniel Patrick Moynihan, the New York Democrat who is the chairman of the Finance Committee, said he would support an energy tax.

Mr. Bentsen's strongest theme was the imperative to cut mushrooming budget deficits. He guaranteed that "you're going to see a substantial cut. . . . What you're seeing for the first time is a major, major reduction in that deficit -- long-term, locked-in deficit reductions."

Because recent projections show deficits worsening, "it would be much harder" to grant the middle-class tax cut Mr. Clinton promised in the campaign or to expand tax relief for IRAs, Mr. Bentsen said.

In addition, deficit pressures will force Mr. Clinton to push a smaller short-term economic stimulus plan this year than his original $60 billion program, the treasury secretary confirmed, echoing a point made earlier before Congress by Leon Panetta, Mr. Clinton's budget director.

Although Mr. Clinton vowed during his campaign that he would put his economic program before Congress on the day after his inauguration, Mr. Bentsen said it would not be ready until mid-February.

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