The sharp political divisions over a tax on imported oil were underscored at a Senate hearing yesterday as some senators strongly supported it, others inveighed against it and administration officials attempted to stake out the middle ground.
"I am very anxious to have the committee examine the various proposals so we can see how bad they are," said Sen. John H. Chafee (R-R.I.) at a hearing of the Senate Finance subcommittee on energy and agricultural taxation. "I am deeply disturbed about this. I guess you could say I am outraged."
Chafee went on to detail the damage he said an oil tax would do to his region, lower-income people, companies and the economy.
"I'll put you down as doubtful," quipped Sen. Malcolm Wallop (R-Wyo.), who conducted the hearing and who is sponsoring legislation to tax imported oil.
Sen. Lloyd Bentsen (D-Tex.), on the other hand, contended that an import tax is necessary to protect the United States against future embargoes by oil-producing nations. "If we learned anything from the Arab oil embargo of 1973, it's that we cannot afford to get hooked again," he said.
Echoing the shift that President Reagan has made on taxing imported oil, Acting Assistant Treasury Secretary J. Roger Mentz said the administration opposes any new tax that would raise revenue to reduce the deficit. But he said the administration is willing to consider new sources of revenue to pay for changes it supports in the House-passed tax revision bill.
Finance Committee Chairman Bob Packwood (R-Ore.) has said in the past that revenue from a tax on imported oil may be needed to make his draft tax legislation now being prepared by committee staff bring in as much money as the current tax code. But strong political opposition to the tax has made it unlikely that it will be proposed, congressional aides have said.
Even Wallop, who leans toward an import fee, began the hearings by saying it makes sense only in the context of energy policy, not for tax-revision or deficit-reduction purposes.
A tax on imported oil would hit lower-income Americans, who pay up to 25 percent of their income for energy costs, much harder than those on the higher end of the scale, who pay 7 percent of their incomes for energy, Mentz said. The Northeast would be harmed more than other parts of the country by higher oil prices due to the tax, and industries that use oil to make products such as chemicals, textiles, paint and steel would face higher costs and be less competitive in international trade.
On the other hand, an oil import tax might keep some domestic producers from going out of business as oil prices decline, because all oil prices would rise to the level set by import costs plus the tax, Mentz said. And it could reduce energy consumption, thus lessening dependence on foreign supplies of oil, he added.
A $5-a-barrel tax on imported oil and a $10-a-barrel tax on petroleum products, such as that proposed by Bentsen and Sen. David L. Boren (D-Okla.), would bring in $35.7 billion in new revenue over five years if there is no dramatic change in oil prices, Mentz said.
Deputy Energy Secretary Danny J. Boggs raised objections to the oil-import fee on free-market grounds, contending that the government "cannot set the right price for oil when it is falling any more than it could set the right price when it is rising with price controls."