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'Time Has Come' for Tax Increase

August 08, 1985

In your editorial regarding an oil import fee, you apparently fell victim to the temptation of supporting a quick and simple (or perhaps simplistic) solution to a complex problem. Like most such "easy" answers, an import fee would almost certainly cause more problems than it solves.

If the import fee were applied only to crude oil, importers would simply switch to importing finished fuels such as gasoline, diesel, and jet fuel instead of crude oil. The U.S. Treasury would gain no revenue, but the already ailing domestic refining industry would be put out of business with the corresponding loss of jobs, etc.

There is presently a free market price balance between domestic oil and imported oil. If the effective price of imports were increased by an import fee, domestic prices could be expected to rise accordingly. If a $5 per barrel import fee were imposed, the average price of petroleum products in this country would probably rise by close to $5 per barrel. The largest beneficiary would be the oil companies who own large amounts of domestic crude oil production.

Since imports account for far less than half of our oil supplies, the profits to crude oil producers would be much greater than the import fees paid to the U.S. Treasury. I doubt that the public would be pleased to find that more than half of their increased cost of energy was going to provide windfall profits to oil companies.

The windfall profits problem could be solved either by a new "windfall" profits tax or by price controls. These "fixes" would, of course, cause still further problems, which would require further remedies, and so forth and so forth. In short order we would find ourselves with a reborn Department of Energy to try to deal with the problems created. In the end the consumer would end up paying not only a higher price for gasoline and fuel oil, but also for the cost and inefficiency of a huge bureaucracy.

These are only a few of the potential problems that an import fee would cause. The list could go on and on. In the last analysis, the consumer will end up paying the bill. If we must tax oil to raise tax revenues maybe we should just go ahead and do it directly with an excise tax on consumption without going through the pretense that someone else will pay.

In any case, The Times is doing its readers a serious disservice by supporting such a proposal without giving it the thought and analysis it should receive.



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