President Carter's new "windfall profits tax" proposal ran into criticism yesterday in a Senate Finance subcommittee as oil-state senators and other conservatives blasted the White house for blunting incentives for new oil exploration.
During a session in advance of House hearings now scheduled for Wednesday, panel members argued that the oil companies should be able to keep all new revenues they get from price decontrol, or at least escape taxes on money they reinvest in the search for more oil.
Sen. Russell B. Long (D-La.), the Finance Committee chairman, told Carter officials that "under your program the industry can raise enough money to stay at the mercy of the Arabs as long as you remain in government-which may not be that long."
Long berated administration spokesmen, "Did it ever occur to you that people are flirting with the survival of freedom in this nation and on this planet?"
He said the current shortage requires that energy production be "more profitable" than any other venture.
The senators' contentions came in the face of testimony by congressional and administration officials that lifting price controls alone would give the oil companies all they need for new exploration.
Emil M. Sunley, deputy assistant secretary of the Treasury, tried to defend Carter's actions by telling long "the administration is doing essentially what you want done-decontrolling oil prices" and that the profits tax was part of the package.
Sunley also contended that the relatively mild windfall profits tax proposal was "not a pussy cat tax that some have suggested." Carter's proposal would bring in between $500 million and $1 billion a year in new revenues.
However, neither Long nor other subcommittee members appeared to be mollified by Sunley's reference to the decontrol action. Sen. Mike Gravel (D-Alaska), the subcommittee's chairman, said he saw "really no need for a windfall tax" of any kind. Other panel members agreed.
For all the strong rhetoric, insiders said the subcommittee's reaction did not necessarily mean that the full Finance Committee ultimately would not enact some form of excise tax on the oil industry, although it most likely will be weaker than Carter has proposed.
Long has hinted earlied he would be willing to push through some sort of windfall tax if it included a hefty "plowback" provision allowing the oil comapnies to escape tax on money they reinvest in new exploration.
However, both the administration and Democrats on the House Ways and Means Committee oppose any such move. Sunley said yesterday a plowback clause would create "distortions" in the way industry stepped up its investment. "We have serious problems about its wisdom," he said.
Carter's proposal is designed to siphon off some of the extra revenues that the oil companies would reap from his decision to lift domestic price controls, and use the money for rebates to finance new energy research and help the poor cope with higher gasoline prices.
The measure has been criticized by liberals as too weak, and there are indications that the House Ways and Means Committee may try to stiffen it somewhat.
Meanwhile, Alice M. Rivlin, director of the Congressional Budget Ofice, told the subcommittee yesterday that Carter's decontrol plan appears sufficient to ensure "a significant amount of new investment" for exploration and development.
She said outlays for oil and gas exploration may rise as much as $27 billion by 1981.
And Sunley estimated that even with the windfall profits tax, Carter's decontrol plan would result in an additional 1.2 million barrels a day of domestic prduction-an increase of 20 percent over what would have occurred without decontrol.
For all their complaining about the windfall tax proposal, subcommittee members spent most of their time yesterday citicizing the administration for a wide variety of energy policies from cutting back on offshore oil leases to restricting the use of Alaskan territory. CAPTION: Picture 1, Sen. Russell B. Long (left), Finance Committee chairman, berates Carter's representatives for windfall oil profits tax proposal. With him is subcommittee Chairman Sen. Mike Gravel. Deputy Assistant Treasury Secretary Emil Sunley; Picture 2 Congressional Budget Office Director Alice Rivlin and Department of Energy Policy Coordination Director Richard M. Smith testified. Photos by James K. W. Atherton-The Washington Post