The Energy Tax: Who Pays?

In his State of the Union address, President Clinton called for a broad-based energy tax to help reduce the federal budget deficit. The tax is expected to generate $21.1 billion in 1997 when it is fully phased in — one-quarter of all new revenue in the overall budget package. However, the motivation of the tax is not solely revenue generation. The administration’s favoring of an energy tax over other potential revenue sources is clearly rooted in its desire to further the social goals of protecting the environment, conserving energy, and reducing our dependence on foreign oil. In addition, the Treasury Department indicated that the tax had to be structured so that it would be borne “fairly and equitably across the country.”