US motorists get fuel tax warning

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The Independent Online
AMERICA'S profligacy with energy is celebrated. But it looks increasingly likely that new Clinton administration's first economic package will include steps aimed at making a small dent, at least, in a problem ignored throughout 12 years of Republican rule.

The Treasury Secretary, Lloyd Bentsen, in a television interview on the hard economic choices facing President Bill Clinton, said an energy tax was 'certainly on the table'. It would both raise revenue and further the administration's environmental goals.

Final confirmation, almost certainly, must await the President's first State of the Union message in mid-February, and the Budget he is due to send to Congress in March.

But Mr Bentsen said there would be a 'fair balance' between spending cuts and tax increases. The former would focus on defence and health care, the latter on higher taxes in upper income brackets and a range of consumption taxes - above all on energy.

Mr Clinton is in a cleft stick. He is committed to halving the dollars 300bn ( pounds 194bn) budget deficit by 1997, yet wants to boost long-term investment. The hope was that a resurgent economy would yield higher revenues without pain; but few believe growth will exceed 3 per cent a year.

The President is choosing the path of least resistance. At 80p a US gallon, petrol is cheaper in real terms than in 1950. With oil imports at dollars 50bn a year, nothing would seem more obvious than a petrol tax increase, yielding dollars 1bn for every 1 cent a gallon levied. But it is still dynamite: woe to he who interferes with America's relationship with the car.

Another option is a flat tax on imported oil, say of dollars 5 a barrel. But that would alienate allies such as Saudi Arabia and Mexico, and risk havoc in Gatt and North American Free Trade Agreement talks.

That leaves a broad-based energy tax on everything from petrol to household electricity. The Congressional Budget Office calculates a 5 per cent levy would raise dollars 15bn a year.

But the proposals have their pitfalls. The middle class, who helped Mr Clinton to win the election, would be hit hardest.

Clinton's battle over gays, page 9

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