Innocuous though it seemed, the suggestion by two Cabinet members for a two-penny-a-gallon hike in the federal gasoline tax was quickly rejected as no less lethal than the alcoholic's first sip out of the bottle.
"This is not policy," Dr. Maritn Anderson. President Reagan's domestic policy assistant, told us. Nor, by his tone, will it ever be policy in this administration. So much for the two-cent gas tax put forth by two of the Cabinet's most energetic and competent members, Budget Director David Stockman and Transportation Secretary Drew Lewis.
More than a trifling tax is at stake. Anderson has been called "the keeper of the sacred scrolls," in some derision for his stubborn insistence that the president stick to what he promised in the campaign. But beyond seeking consistency, Reagan wants to avoid the catastrophic recourse to the old tax bottle that has
Joseph 'Clark's tenure in Canada was abbreviated when, breaking campaign pledges, he did not cut tax rates because of his quest for a balanced budget. In Britain Margaret Thatcher's promised tax relief did not materialize when she overbalanced upper-level income tax reductions with increases in the value-added tax affecting mainly lower-income taxpayers; Prime Minister Thatcher's move produced accurate forecasts by leaders of the U.S. tax cut movement, Professor Arthur Laffer and Rep. Jack Kemp, that it would chill Britain's economic recovery.
Yet any conservative is sorely tempted to balance the budget by drinking from the tax bottle. Even Stockman, sponsored by Kemp to the first supplyside director in the Office of Management and Budget, seemed to succumb.
While other Cabinet members were still learning the way to the washroom, Stockman had been making a crash budget of unexcelled virtuosity. Yet those last billions of dollars eluded him. The answer came from the OMB civil servants as the song of a temptress: use "tax expenditures."
A "tax expenditure" is bureaucratese for that portion of a citizen's own income the government does not tax because of a deduction -- implying that all funds belong to Uncle Sam unless otherwise designated OMB's final draft abounded in recommendations to capture a billion here and a billion there by halting "cash expenditures."
New York City businessman-scholar Lewis Lehrman, a militant supply-sider and lucid writer, arrived in Washington Feb. 11 to help Stockman draft the president's economic report. In countering proposed higher revenue through reduction of "tax expenditures," Lehrman was appalled more by the language than the substance. At Lehrman's insistence, the report was scrubbed of all references to "tax expenditures."
But when the economic program went before the Cabinet for final approval, the most highly combustible tax-increasing proposal remained (through cleansed of the "tax expenditure" label): eliminating what remains of the oil depletion allowance. No Cabinet member disagreed, but Interior Secretary James Watt -- a supply-sider who has worked more closely with Stockman than any other Cabinet member -- looked a little ill.
The man at the head of the long table then interrupted, "Wait a minute," said Reagan. "This is not the last administration" -- a reference to Carter's relish for taxing the oil industry. Without calling for a vote, Reagan removed the oil depletion allowance repeal from the program.
Even so, Stockman's final version of the budget scraped together an extra $2 billion in new "user fees," mostly on aviation, a hoary fiscal gimmick dating back to President Eisenhower's day. But there was nothing said about higher gasoline taxes until the nation's governors gathered in Washington Feb. 22. At the urging of governors, Stockman and Lewis suggested the $2-billion-a-year, two-cent gas tax to replenish highway maintenance funds to the state being cut under Reagan budget austerity.
Some ardent supply-siders, furious at the notion of repealing the oil depletion allowance, can see some merit in increasing the gas tax, whose proceeds do not rise with inflation. But Reagan's advisers see otherwise. "It could be the first step toward Thatcherization," one senior aide told us. "Better not to touch it."
Nobody knows better than Stockman himself the inflationary impact of higher tax rates, as he declared on CBS'S "Face the Nation' Feb. 22 in arguing that lower tax rates are conducive to saving: "The government doesn't save. When the government collects those [higher] taxes, those revenues will be turned immediately into expenditures. By lowering taxes across the board, we will change incentives for savings and we will increase . . . savings."
Stockman has the doctrine down. All he need remember is when looking for that spare billion, however of grabbing the jug of tax redeye, even for a little sip.