Panetta Expects Gas Hike to Be Only Energy Tax

The Clinton Administration, giving up its effort to win a broad-based energy tax, conceded Sunday that only a gasoline tax is likely to survive the House-Senate conference committee that is fashioning a final version of the President’s economic plan.

“I think the likelihood is that we’re looking more at a gas tax than a BTU tax or a utility tax of any kind,” said Budget Director Leon E. Panetta in the Administration’s first public concession of defeat.

Appearing on CBS’ “Face the Nation,” Panetta said that the Administration also hopes to restore some of the Medicare spending that the Senate has voted to cut, as well as tax breaks to help small businesses.

To compensate for that additional spending, it appears that the ultimate gasoline tax increase would have to be higher than the 4.3 cents-a-gallon levy now on the table in the Senate version of the economic package. Panetta declined to specify how much greater the figure is likely to be.

The size and shape of the energy tax is the knottiest of the hundreds of issues confronting House and Senate negotiators as they seek to produce an economic plan that can pass both chambers before Congress begins a monthlong break in early August.

Divisions over the issue are so sharp that some in Congress have suggested scrapping the energy tax altogether, even if it means falling significantly short of President Clinton’s goal of cutting the deficit by $500 billion over five years.

But on Sunday, Panetta repeated Clinton’s assertion that he will not give much ground on the $500-billion bottom line. He added that the Administration’s commitment to the goal has not softened in light of its announcement last week that this year’s deficit will not be as high as earlier projected.

“I think we need to stick to that target of $500 billion in deficit reduction,” Panetta said. “Look, we’re looking at $300 billion deficits into the future. As a matter of fact, (in) 1998, even with these revised deficit numbers, we’re looking at a $380 billion annual deficit” unless the government makes major changes in its economic policies.

Although most lawmakers have been saying for weeks that the idea of a broad-based tax is dead, Clinton apparently had not given up on it as recently as Thursday, when he argued its merits in an appearance with congressional leaders on Capitol Hill.

“We have the world’s lowest energy levies, and we’re trying to promote conservation and a purer and cleaner environment, which is the reason we proposed it in the first place,” the President said. “But it was proposed, obviously, to help close the gap to meet our deficit reduction targets also.”

The House approved Clinton’s proposed $72-billion BTU tax, which would have raised the price of most forms of energy on the basis of their heat content, as measured in British thermal units. Having taken that controversial stand, many House members insist that some form of broad-based energy tax must remain in the final package.

The Senate, however, slashed the tax by more than two-thirds, to $23 billion, and applied it only to transportation fuels, with an exclusion for the financially ailing airline industry. To make up for the lost revenue, the Senate imposed sharper spending cuts than Clinton and the House had wanted, including additional reductions of $38 billion in Medicare.

Panetta’s comments also dampen the prospects for one proposed compromise that was making the rounds on Capitol Hill: a gasoline tax combined with a utility tax.

Rep. Kweisi Mfume (D-Md.), chairman of the Congressional Black Caucus, said on the same program that the Administration should reconsider the $500-billion target, so that it might be able to restore funding for many of the social programs cut by the Senate.

“I don’t know if any (energy tax) increase is acceptable,” he said. “What would be acceptable is making sure that we take care of restoring the earned income tax credit (for the working poor) fully, food stamps, child hunger programs, the family preservation program, the empowerment zones.

“This notion of whether we have $500 billion or $490 billion really becomes for many of us a non-starter, because we’re not wedded so much to numbers as much as we are wedded to the notion of budget reduction and doing something meaningful this year,” Mfume added.

Rep. John R. Kasich (R-Ohio), ranking Republican on the House Budget Committee, echoed previous GOP criticism.

“Unfortunately, this package that the President is promoting is nothing more than tax and spend,” Kasich said. “For me, the bottom line is, is it going to create jobs? And the answer is, of course it’s not going to create jobs. This package is a job killer.”