May 1, 2015

This week’s ETW Document of the Week is a memo sent to President Clinton on February 5, 1993 by his chief economic policy adviser, Robert Rubin, framing the decisions Clinton would make on taxing energy. The memo lays out a variety of options for a broad-based energy tax, with the pros and cons of each (a percentage tax on source, a percentage tax on use, a tax on the energy value (measured in British thermal units, or BTU), a tax on carbon, a tax on motor fuels, and a tax on oil imports).

Many of the pros and cons of the various types of energy taxation are just as valid today as they were 22 years ago. Clinton eventually selected a BTU tax in an amount to raise $22 billion a year by the end of his term but also proposed increases in LIHEAP funding and food stamps to offset some of the regressive nature of the tax. But the Senate Finance Committee killed the BTU tax and it was eventually replaced with a 4.3 cent per gallon tax increase on gasoline and diesel fuel – the last such motor fuels tax increase enacted by Congress.