This page summarizes some past efforts to increase energy taxes in the U.S.
Clinton Btu Tax (1993)
In 1993, the Clinton Administration proposed a general tax on all energy forms, as part of a broader deficit-reduction plan and also to promote energy conservation. The tax was to be levied on coal, natural gas, liquefied petroleum gases, gasoline, nuclear-generated electricity, hydro-electricity, and imported electricity, at a base rate of 25.7 cents per million Btu, with an additional 34.2 cents per million Btu on refined petroleum products. Opposition was broad-based, ranging from oil companies and farmers to major energy-users such as aluminum corporations and their advocates at the National Association of Manufacturers. The “Transportation Fuels Tax” became law on Oct. 1, 1993, but not as the broad-based tax originally proposed. As enacted, the law imposed an average tax of 13.814 cents per gallon on gasoline, diesel, and special motor fuels.
An unfortunate legacy of the Btu tax proposal has been to discourage elected officials from seeking higher levies on fuels or even fuel-based emissions. Indeed, as Grist’s Dave Roberts reported, Bill Clinton himself, addressing the National Clean Energy Summit in August 2008, said he supports pricing carbon via a cap-and-trade system because “I tried [a carbon tax] once. It didn’t work for me.” Unfortunately, Clinton’s framing of his Btu tax as a carbon tax is both inaccurate and unhelpful. In his remarks, the former president also missed a chance to draw lessons from the 1993 failure. One is that a tax proposal geared toward a societal outcome (e.g., climate protection) rather than revenue should be revenue-neutral. A second is that the design of the tax should avoid the smorgasbord of exemptions that weighed down the 1993 proposal.
Recently, in a major story that led the NY Times front page on Dec. 5, 2013, the paper’s new climate-beat reporter Coral Davenport picked up Clinton’s meme:
Past efforts to enact a carbon price in Washington have failed largely because powerful fossil-fuel groups financed campaigns against lawmakers who supported a carbon tax. In 1994, dozens of Democratic lawmakers lost their jobs after Al Gore, who was vice president at the time, urged them to vote for a climate change bill that would have effectively taxed carbon pollution. In 2009, President Obama urged House Democrats to vote for a cap-and-trade bill that would have required companies whose carbon-dioxide emissions exceeded set levels to buy emissions rights from those who emitted less. The next year, Tea Party groups spent millions to successfully unseat members who voted for the bill. (emphasis added)
If memory serves, the Btu tax was actually promoted as a broad-based environmental measure and a revenue-raiser, and hardly if at all as a climate measure. Moreover, the Democrats’ subsequent resounding defeat in the 1994 midterm elections was due to a constellation of forces including then-GOP leader Newt Gingrich’s astute political branding (the “Contract for America”), with the Btu tax backlash being only one factor. (Otherwise, Davenport’s account is solid.)
Minnesota Carbon Tax (mid-1990s)
In the 1990s, energy activists in Minnesota led in part by the Institute for Local Self-Reliance undertook an effort to enact a billion-dollar state “tax shift” to raise energy prices while reducing taxes on income and/or property. The proposal was debated extensively but was never enacted into law. The Institute has archived key documents in support of the initiative, including testimony, fact sheets, economic analyses and draft legislation.
Other State Initiatives
The State Environmental Resource Center compiled brief accounts of past carbon tax initiatives in Minnesota and five other states: CA, MD, OR, TX, VT. Although SERC has ceased operation (its office is now the Wisconsin office for Defenders of Wildlife), their helpful page may still be accessed here.
John Anderson 50-50 Tax (1980)
In August 1979, Rep. John Anderson (IL) called for a 50-cent-per gallon energy conservation tax on motor vehicle fuels to reduce consumption and dependence on foreign oil. He proposed using the revenues from the tax to reduce payroll taxes by 50 percent, increase Social Security benefits, compensate those who were not on a payroll and thus not subject to the payroll tax, exempt farmers and allow tax credits for businesses “unfairly penalized.” (See Anderson’s Campaign Brochure.) In making his proposal, Congressman Anderson was not naive about the politics of proposing a gas tax:
“I am under no illusions regarding the popularity of this tax,” he acknowledged, and went on to state, prophetically, “But higher gasoline taxes in this country are unavoidable. We have no choice. Either we tax ourselves by means of a gasoline tax, or OPEC will tax us in the form of higher and higher prices for crude oil.” (Unfortunately, the Sept. 11, 1979 news clip with this quote is no longer Web-available.)
At that time, of course, the importance of taxing fuels other than gasoline to reduce emissions of CO2 emissions was not yet recognized.