Senate Finance Committee Chairman Bob Packwood (R-Ore.) is expected to rule out a tax on imported oil in a draft tax proposal he is developing for the committee's consideration, congressional sources said yesterday.
Initially touted as a possible method of financing changes that the Senate panel wants to make in the tax-revision bill passed by the House last December, the oil-import fee has met with objections from legislators from oil-consuming states.
Yesterday, for example, Finance Committee members John H. Chafee (R-R.I.) and George Mitchell (D-Maine) said they would oppose any tax-overhaul bill that included an oil-import tax to offset the loss of federal revenue from lowering tax rates.
Packwood never specifically endorsed an oil tax in the package he is developing to serve as a starting point for the committee's work. But he has said on several occasions he would like to have the administration's consent to employ such a tax if no other way could be found to come up with needed revenue to balance losses.
President Reagan initially opposed using any new energy or consumption taxes as part of tax overhaul or as a way to reduce the federal deficit. Then, on Feb. 4, Reagan said he might be willing to accept a tax on imported oil "if it were only there to offset some of the loophole changes" that senators "may feel are necessary."
The draft tax proposal is expected to be finished sometime next week. But several sources suggested that opposition makes it unlikely that an oil fee would be included. They also said that no planning has been done with an oil-import fee in mind. Packwood could not be reached for comment.
Sources also said the Packwood proposal may attempt to bring in the needed revenue -- as much as $130 billion during five years to pay for changes in a tax revision package approved last December by the House of Representatives -- without increases in taxes other than on income, such as a broad-based energy tax or a gasoline tax.
That would mean the money would have to come from curtailing tax deductions and credits for businesses or individuals. Tax writers are looking at limitations in deductions for interest payments by businesses and at limiting the deduction companies take for advertising expenses, for example.
But sources suggested it is too soon to conclude that a gasoline tax or some other type of sales or energy tax would not find its way into the proposal.
The oil-import tax seems to have been a classic case of the rise and fall of an idea in Washington, moving from obscurity to prominence to oblivion without ever being officially proposed or actually debated as legislation. For awhile, every legislator who had met with Reagan at the White House was asked by reporters what the president had said about oil taxes, and administration officials leaked promises that their stance on an import fee was more favorable than what they were permitted to say on the record.
Then economists testifying before the Senate Finance committee expressed objections to an oil-import tax on the grounds that it would reduce the economic benefits from falling oil prices. Senate Majority Leader Robert J. Dole (R-Kan.) and Sen. Pete V. Domenici (R-N.M.), among others, said they wanted to reserve the revenue from an import fee to reduce the deficit.
Senators from northeastern and midwestern states -- who have strong representation on the Senate Finance Committee -- said their regions would be harmed by a tax on imported oil. Senate Democrats voted Tuesday to oppose using any external source of revenue to finance restoring tax breaks cut back by the House bill.
A Senate Finance subcommittee will hold hearings on the oil-import fee today and Friday. Several members of the committee, principally those from southwestern and oil-producing states, are sponsoring bills to impose oil-import taxes, either as a flat per-barrel levy or on a sliding scale pegged to a particular oil price.