THE IDEA OF a tax on imported oil seems to be gaining favor at the White House. That's unfortunate, because it's a bad choice. But you can see its appeal. Its promoters claim that it will raise a lot of money, that OPEC will have to absorb most of the cost and the American consumer won't feel it. Even better, the argument goes, it can be imposed by a stroke of the presidential pen without any inconvenient votes in Congress.
It would certainly raise a substantial amount of money. A tax of $5 a barrel--that's 11.9 cents a gallon--would bring in about $10 billion a year. But the rest of the argument is dangerously wrong.
Why would OPEC absorb an American tax? It hasn't absorbed other countries' taxes. If there's one thing that the past decade can be said to have demonstrated to anybody's satisfaction, it is the truth that an American president can't force down the world price of oil.
A $5 tax on each barrel of imported oil is going to mean a price increase of roughly $5 for all oil used in this country, whether imported or domestic. The past decade has also shown pretty clearly that American domestic prices faithfully follow the import prices. An import tax simply raises the prices for the American oil producers--which gives you a broad hint about one important source of support for the scheme.
The tax would be paid by consumers, but not by all consumers equally. The family that heats its house with oil would pay more, but the family that uses natural gas would not. It means that the impact would fall disproportionately heavily on the Northeast, where oil heating is most prevalent. As a way to encourage people to conserve energy, a tax makes a lot of sense. But why single out New England? Why not encourage all consumers equally?
Along with its other defects, a presidentially imposed import tax is probably illegal. The plan is to invoke the president's authority under the trade laws to protect the national interest. That's what President Ford did when he established an import fee briefly in 1975, and the Supreme Court upheld him. But Mr. Ford was able to argue plausibly that he was mainly trying to protect the country from a dangerous degree of dependence on foreign oil. It's highly uncertain that the court would countenance an attempt to use that same authority for the different purpose of simply raising revenue. The Constitution assigns that responsibility to Congress.
There's a better solution--a flat tax on all oil, foreign and domestic alike, and an equivalent tax on natural gas as well. A tax of $3 a barrel--that's just over 7 cents a gallon--on all oil, and 55 cents a thousand cubic feet on gas, would raise nearly $30 billion a year. It would avoid the further enrichment of the already adequately prosperous oil producers. It would avoid unfair discrimination among types of users, or among regions of the country. It would avoid a dubious attempt to circumvent the Constitution. It would support conservation throughout the country. It would make an enormous contribution toward reducing the deficit. If there's to be a tax on energy, a broad and equal tax on all oil and natural gas is the right one.