President Reagan's proposal for a standby $5-per-barrel excise tax on oil got a chilly reception yesterday on Capitol Hill, where similar proposals in recent years have been rejected quickly.
The tax, which Reagan proposed Tuesday in his State of the Union Address, would go into effect on Oct. 1, 1985, if the federal deficit fails to fall below acceptable levels.
"I think this idea peaked in the State of the Union Address," said Rep. James M. Shannon (D-Mass.), who led the successful fight in 1980 against President Carter's proposal for a gas conservation fee.
"The timing is way off on this one," he said.
Shannon, a member of the House Ways and Means Committee, which deals with all tax legislation, noted that administration officials told reporters that they do not expect that the oil tax or the other standby taxes the president proposed Tuesday night will be necessary.
"You could say that this is an insurance policy for the future--a remedy that will be at hand if needed," Reagan said.
According to the White House, the excise tax on oil would raise the price of gasoline and home heating oil by about 12 cents per gallon for consumers.
"It seems to me a lot to ask members of Congress to vote for what is going to be a very unpopular tax and then say it might not go in place," Shannon said. "Any sane politician is going to be very skeptical."
A number of economists have suggested recently that the administration should take advantage of any sharp decline in the price of petroleum in coming months by imposing a stiff tariff on oil imports.
But there seemed almost no support yesterday for a tax that would not come into play for at least 2 1/2 years.
"I don't know how you would figure out what the impact of that might be, given the tremendous amount of uncertainty between now and then," said Edward Murphy, director of statistics for the American Petroleum Institute.
"We don't know what the price of oil is going to be by October, 1983, much less 1984 or 1985, and we don't know what is going to be happening to demand for oil or supply," Murphy said. "All you can say with certainty is it would make the price of oil higher--no doubt about that--and it would make U.S. oil exports less competitive on the world market."
Several congressional sources also expressed doubt about the wisdom of boosting home heating oil prices at a time when a major legislative effort is under way to bring down soaring natural gas prices.
The tax proposal seemed likely, moreover, to bring together an unusually powerful coalition of opponents representing oil-producing states, the states in the Northeast that rely heavily on oil for home heating, as well as all segments of the transportation industry.
Rep. John D. Dingell (D-Mich.), chairman of the House Energy and Commerce Committee, said he cannot understand why Reagan would propose a tax on all oil, both imported and domestic.
"It sure was a surprise to me," said Dingell. "He not only enrages consumers, but also consumer industries, as well as the domestic oil producers, who would find themselves further troubled."
Edwin Rothschild of the Citizen/Labor Energy Coalition noted that the proposed tax would "discriminate" against regions of the country that are more dependent on oil, such as New England.
"But beyond that," he said, "it's fanciful to talk of imposing a tax in a situation where you have no idea what the situation is going to be. This is bad tax policy, bad economic policy and bad energy policy."