President flexible on energy tax Senators hinting at rise in gas levy as compromise


PHILADELPHIA -- In a deft pirouette one day after his crucial victory in the House, President Clinton began yesterday to back away from the most controversial part of his economic program -- a huge nationwide energy tax.

At the same time, there were indications in the Senate that his critics are giving ground as well. All indications seemed to imply a potential compromise that may involve some combination of a smaller energy tax, perhaps an increased gasoline tax and deeper spending cuts.

Sen. David L. Boren, an Oklahoma Democrat and one of Mr. Clinton's most dogged opponents on his energy tax proposal, said yesterday that he "could live with" a gasoline tax increase proposed by two other Southern senators, but not with the so-called BTU tax pushed by the White House.

The BTU tax, which would affect almost every form of energy and show up on a separate line on utility bills, has alienated large chunks of the middle class and prompted Republicans to point out repeatedly that Mr. Clinton was reneging on his election-year pledge to cut, not raise, middle-class taxes.

Mr. Clinton told a cheering audience of about 2,000 people in downtown Philadelphia yesterday that he had proposed the energy tax to deal with larger-than-expected budget deficits. But true to his style of town hall, participatory democracy, the president signaled a compromise by telling the audience, "You've got to decide whether it's worth it."

After prevailing by only six votes in the House on Thursday night, after being heckled in California for breaking his tax promises and after two weeks in which his approval rating has plummeted to 36 percent -- an all-time low for a new president -- Mr. Clinton has a pretty good idea of the public's answer.

While he appeared yesterday to be acknowledging the inevitable, Mr. Clinton also suggested that money he was seeking would still have to come from somewhere.

'Principles' of package

Twice in his speech here, Mr. Clinton enunciated "the principles" of what the final budget package that is sent to the Oval Office for his signature must contain. Neither time did he mention the energy tax.

The principles the president laid out were:

* Upper-income Americans must pay higher income taxes.

* The annual budget deficit must be lowered by $500 billion over the next five years.

* The tax code must be changed in ways that promote the creation of jobs, especially in cities.

* There must be incentives for Americans to move from the welfare rolls to the employment rolls.

According to a senior administration official, Mr. Clinton is now willing to accept almost any new formulation the Senate comes up with as long as it doesn't violate these goals.

The official said he did not expect the Senate to replace the BTU -- or British Thermal Unit -- tax entirely with the gasoline tax, which the administration regards as more regressive -- that is, it falls harder on poorer Americans.

Mr. Clinton's new flexibility on the issue seems a dramatic departure from his promises to House Democrats just two weeks ago that he would fight to keep his proposal intact in the Senate.

But as it happened, many Democratic House members said Thursday night that they were voting for the president's tax bill with the hope that the Senate would improve it, particularly the BTU tax.

"There are a lot of members in the House who want to continue to work with the Senate," Mr. Clinton said yesterday at the White House before leaving for Pennsylvania. "So I think that there will be an effort to work all this out."

The president lobbied as many as 60 congressmen on the phone in the hours leading to the showdown House vote, and now the process begins all over again. The complexity of the negotiations was indicated by the flurry of activity in the Senate yesterday.

Sen. Charles S. Robb, a Democrat from Virginia, proposed that Mr. Clinton's BTU tax be replaced with a 50-cents-a-gallon increase in the gasoline tax over five years, at the rate of 10 cents a gallon per year.

This proposal, similar to a deficit-reduction plan offered last year by Ross Perot, is probably far larger than anything the Congress would accept. But it adds Mr. Robb to the list of Democratic senators with whom Mr. Clinton must personally hammer out an agreement.

Mr. Robb said on the Senate floor yesterday that he favored the gasoline tax over the BTU tax because it would be "easier to administer, involves less regional distortion . . . is better at reducing air pollution, is better at reducing oil imports and is less likely to adversely affect American competitiveness."

Clinton administration officials had considered proposing a gasoline tax increase, but they dropped the idea in favor of the BTU proposal in the belief that it would be more politically palatable to Congress because the gasoline tax is so visible at the pump.

But the wide-ranging impact of the BTU tax has inspired some in Congress to view the gasoline tax in a new perspective.

Industries change tune

"Only upon introduction of the BTU tax has serious talk of increasing the gasoline tax become possible," Mr. Robb said on the Senate floor yesterday.

"Where auto companies once stood alone in an unlikely alliance with environmentalists in favor of the gas tax, now a whole range of industries see it in their self-interest to support a gas tax."

Mr. Robb said his proposal would raise $130 billion over five years, compared with $72 billion by the BTU tax.

Sen. John B. Breaux, a Louisiana Democrat who sits with Mr. Boren on the Senate Finance Committee and is likely to play an influential role in committee deliberations to put together a compromise, suggested something much less ambitious.

Mr. Breaux has promised to offer a plan to replace the BTU tax with an 8-cents-a-gallon increase in the gasoline tax and additional spending cuts that he has yet to identify.

"The bottom line is that we can come up with a package in the Senate . . . that will meet the goals of this president in terms of deficit reduction and that will be acceptable to the House as well," he said.

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