An energy consumption tax would hit the poor and middle class hard

February 04, 1993|By Chicago Tribune

WASHINGTON -- Middle-class Americans, promised a tax cut by Bill Clinton, the candidate, may be hit with a tax increase by Bill Clinton, the president.

Though President Clinton's aides stressed yesterday that final decisions on taxes and spending won't be made for a few more days, they repeated that Mr. Clinton is considering imposing a broad tax on energy consumption to help him meet his deficit-reduction goal.

Such a tax would be borne by everyone, but it would be felt more by the poor and middle class, who spend a much greater percentage of their income than the wealthy on gasoline, home heating and electricity. And that has some people crying unfair.

"I think it's bad policy and terrible politics to go 180 degrees from your campaign promise in your first budget salvo," said Robert McIntyre, director of Citizens for Tax Justice, a labor-supported group that in the late 1980s was headed by David Wilhelm, Mr. Clinton's campaign manager and now the Democratic national chairman.

An across-the-board energy tax would say, "When you voted for restoring justice in the tax system, you didn't get it," Mr. McIntyre contended.

Mr. Clinton hinted at shared sacrifice yesterday in a speech in which he gave his broadest economic overview since assuming office.

Using language reminiscent of his campaign, Mr. Clinton told White House budget employees, "Before I ask working Americans to work harder and pay more, I will ask the economic elite to pay their fair share."

But Mr. Clinton's proposed tax increases on the wealthy and spending cuts still would fall far short of his goal of nearly halving the deficit in four years. So in addition to taxes on the wealthy, Mr. Clinton's aides renewed talk of increasing energy taxes to raise the money he needs to meet his ambitious deficit reduction goals, and higher energy taxes would hit the middle class harder.

Said Michael Schuyler, senior economist for the Institute for Research on the Economics of Taxation: "The middle class is where the majority of potential tax dollars lie."

Mr. Clinton could pay a political price. While he distanced himself from his tax-cut pledge as the campaign wore on -- and abandoned it altogether last month -- Mr. Clinton risks being compared to President Bush and his 1988 "no new taxes" vow if he raises taxes that hit the middle class hard.

Overall, Mr. Clinton's tax plan may be progressive. Aides confirmed that Mr. Clinton intends to raise the top income tax bracket to 36 percent from 31 percent on people earning more than $200,000 a year, a 16.1 percent rise. He'll also ask Congress to put a 10 percent surcharge on incomes above $1 million, they said.

In addition, aides said, the administration is contemplating taxing a greater share of Social Security benefits paid to wealthy retirees as a way of restraining mandatory spending on entitlements, which are responsible for a growing share of the deficit.

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