Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, February 20, 1993 TAG: 9302200114
SECTION: BUSINESS PAGE: A-7 EDITION: METRO
SOURCE: JULIA C. MARTINEZ KNIGHT-RIDDER/TRIBUNE
DATELINE: LENGTH: Long
CRITICS POINT TO HIDDEN COSTS FROM FUEL TAX
Take the slender, greasy french fry, wrap it in President Clinton's energy tax plan, and you have one fried potato that will be harder to sell overseas.Anyway you slice it, opponents of Clinton's broad-based energy tax said Thursday, a sweeping energy tax would hurt U.S. competitiveness overseas and unfairly burden middle-class taxpayers with higher prices for everything from gasoline to french fries.
"What is a french fry? It's a raw potato that's had a lot of energy added to it," said John P. Hughes, director of technical affairs for the Electricity Consumers Resource Council, a trade group representing some of the nation's largest industrial companies, such as Bethlehem Steel and General Motors Corp.
From the field to the frying pan, the unctuous tuber uses every conceivable form of fossil fuel, from the oil that goes into a harvesting machine to the gasoline that transports potatoes to processing plants, to the coal that fires the cookers, to the electricity that cools the warehouses. All are energy sources targeted for higher taxes under Clinton's tax package. The energy tax would be imposed at every step along the way.
"If American producers have to have a higher-priced french fry to pay for the energy that goes into producing it, we could lose our 56 percent market share," Hughes said. "This will result in a reduction in the export of this product and the loss of jobs."
The same could be said of steel, paper, aluminum and a whole array of U.S. products that use a lot of energy in the manufacturing process, opponents of the tax argued.
At home, they said, Americans also would suffer, paying more for those same products, leaving less to spend on other goods and services that would stimulate the economy.
The tax proposed by Clinton to Congress on Wednesday would increase the cost of gasoline, natural gas, home heating oil and electricity coming from coal, hydropower and nuclear power. The tax, phased in over three years, would not apply to renewable sources of energy such as solar, geothermal or wind power.
Many observers said they did not expect the new taxes to raise prices substantially on gasoline, heating oil and natural gas.
"This is really much ado about nothing," said Morris Adelman, economist with MIT Center for Energy Policy.
"We'll see every industry yell like hell if it means the tiniest burden on them. But it won't have any particularly significant effect on the energy markets. And for most industries, it is not a big enough part of total production to make much of an impact on international competition."
The total impact on an average household would range from $100 to $143 per year, said Edwin S. Rothschild, energy policy director for the consumer group Citizen Action.
"In the context of the overall tax package [the energy tax] is well balanced," said Rothschild. "That's why we don't want special interests like the oil industry picking away at things they don't like."
The tax would apply to the energy content of the fuel, as measured in British thermal units, or Btu. One Btu is the amount of energy required to raise the temperature of 1 pound of water 1 degree Fahrenheit.
It would be imposed on producers, refiners and transporters and be passed on to consumers in the form of higher prices. With gasoline, for instance, the tax would be imposed on the refiner, which would have to recoup it by passing on a higher price to its distributors, which, in turn, would pass a higher price to service stations. The service stations would increase the pump price to motorists.
But competition at each link in the distribution chain might force a company to swallow part of the higher tax.
As proposed, the energy tax would collect $1.5 billion in fiscal 1994, $8.9 billion in 1995, $16.4 billion in 1996 and $22.3 billion in 1997.
Consumer groups called the package fair and balanced, saying it would promote conservation and reduce consumption of imported oil and highly polluting fuels such as coal.
The petroleum industry registered perhaps the fiercest opposition to the tax, which would cost oil producers 2 times that of coal or natural gas, because, administration officials said, oil pollutes more than coal or natural gas. As proposed, coal and natural gas would be taxed at 25.7 cents per million Btu, while oil would be taxed at 59.9 cents per million Btu.
Charles DiBona, president of the American Petroleum Institute, which represents the largest oil companies, assailed the plan as a burden on U.S. industry and likely to fall short of its aim of improving energy efficiency and reducing dependence of foreign imports.
Mark Stultz, spokesman for the American Gas Association, which represents natural-gas producers, acknowledged that the tax plan would place the natural-gas industry in a better position relative to its oil competitors and would stimulate the use of natural gas as a vehicle fuel, but attacked the plan as a burden to natural-gas customers that could lower demand.
"What will happen, I think, is that people will become more efficient in their use of energy," said Guus Lubsen, president and chief operating officer of Quaker Chemical Co., in Conshohocken, Pa. The tax "will focus managers on using energy more efficiently, so it will not ultimately be a terrible cost to business."
Would Americans mind paying a few pennies more for a basket of french fries?
Probably not.