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The Taxation of Energy in the U.S.: Who Pays?

1 min readBy: Arthur P. Hall, Ph.D.

Download Special Report No. 29

Executive Summary

Governments at all levels in the United States have become increasingly interested in using energy consumption as a taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. base, as the escalating tax burden is evidence to. The Clinton administration’s unsuccessful proposal for a tax baseThe tax base is the total amount of income, property, assets, consumption, transactions, or other economic activity subject to taxation by a tax authority. A narrow tax base is non-neutral and inefficient. A broad tax base reduces tax administration costs and allows more revenue to be raised at lower rates. d on British Thermal Units (or BTUs) in its fiscal year 1994 budget received high-profile attention and opposition. In the end, Congress instead passed a gasoline tax increase of 4.3 cents per gallon. Thirteen states followed this example — continuing a trend that began in 1990 — and enacted higher gasoline tax rates for fiscal year 1994. Furthermore, not including the more than $200 million in motor fuel tax increases, $160.6 million (3.9 percent) of all state tax increases enacted for fiscal year 1994 were energy-related taxes.

The interest in energy taxes typically couples a perceived need for greater tax revenue with arguments about the need for greater energy conservation and environmental protection. These arguments have continued despite the sparse amount of information about the total amount of energy-related taxes Americans already pay.