Energy Taxes

WASHINGTON -- State and local governments could increase their total revenues by $7 billion a year if they taxed energy products at the same rate as other goods and services, according to a study released this week by the Alliance to Save Energy.

State and local taxes on energy products are on average 30% percent lower than the general sales tax in 40 states, the study said.

The study by the nonprofit group also found that 10 states, plus the District of Columbia, tax energy at higher rates.

States and localities simply will not raise the energy taxes because the "American people don't like what they've got now," said Jim Martin, the director of state-federal relations for the National Governors' Association.

By undertaxing energy, states are in effect encouraging pollution and have inadvertently set energy policy, David M. Nemtzow, president of the Alliance to Save Energy, told reporters at a press conference.

The average state tax on energy is 4.3%, whereas the average state sales tax is 6.4%, according to the report.

The energy group suggested state officials make the following tax policy changes:

* Tax energy products at rates that are at least as high as those on non-energy products.

* Eliminate subsidies to highway users.

* Target energy tax breaks only to people who need them.

* Eliminate industrial energy exemptions and use the resulting revenues to promote industrial competitiveness.

States could solve many of their financial problems, including budget deficits, by raising energy taxes, Nemtzow said.

For example, California had a $1.2 billion budget gap in fiscal 1994, but if taxes on energy products had been raised, the state would have garnered an additional $1.4 billion in revenues, according to the study. Texas, which will experience a $1.7 million budget shortfall in fiscal 1994, would increase its revenues by $778 million.

"States that tax energy fairly have the opportunity to reduce the tax burden on other products, to increase the level of social services for their residents, and to lessen wasteful and polluting energy expenditures," Nemtzow said.

"It's easy for them to say" raise taxes, but it's "suicidal" in today's political climate, said Reggie Todd, legislative affairs director for the National Association of Counties. "It's not politically viable for communities to be coming up with new ways to tax its citizens."

"People are saying cut the budgets," not raise taxes, Martin said.

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