Bentsen Sees Hill Opting For Gas Tax

THE House and Senate will likely wind up approving a narrow energy tax - such as a tax increase on gasoline - rather than the broad-based Btu energy tax the Senate passed, according to Treasury Secretary Lloyd Bentsen.

If he were still a Texas senator, he told a Monitor breakfast July 20, "I'd move more toward the Senate version ... and I think that's what will happen."

The Senate version calls for a hike of 4.3 cents a gallon in transportation fuels, versus the Btu tax, which would tax various forms of energy according to their heat content. However, the Btu has several advantages: It was slated to raise $72 billion over five years, while the fuels tax would bring in only $22 billion. The Btu tax would also promote more environmentally friendly practices than the fuel tax.

So what sunk the Btu tax? "The biggest point was on competitiveness, particularly in manufacturing," Bentsen said. "I think there was some legitimacy to that. I was prepared to propose that we not put in [a tax] on any manufacturing."

On the question of higher tax rates, Bentsen made the oft-repeated argument that rates will still be much lower than they were in previous decades - and much lower than in Europe. At the recent Group of Seven summit in Tokyo, he said, the Germans talked about cutting their tax rate from 50 percent to 45 percent.

In 1980, in the United States, he says, the tax rate was about 48 percent, and in the 1960s, about 78 percent. Despite those high rates, he said, increases in the gross national product during the '60s were high. This contradicts the Republican argument that high taxes hurt the economy.