Clinton abandons Btu tax Energy industry lobbyists' efforts cited by Bentsen

WASHINGTON -- President Clinton abandoned his controversial Btu tax on the heat content of fuel yesterday and signaled his willingness to accept a new form of energy tax based on consumption.

Treasury Secretary Lloyd Bentsen said last night in a television interview that the Btu tax had been "put aside" in the face of opposition from conservative senators and indicated that it would be replaced with some other kind of tax.


"As a Btu tax, I don't think you're going to see it," Mr. Bentsen said on the "MacNeil-Lehrer News Hour" last night.

He blamed the demise of the Btu tax on a skillful campaign waged by the energy industry and its army of lobbyists to discredit the tax as unfair and economically disastrous to energy-producing states.


Mr. Clinton and Senate Democrats are committed to finding an alternative package of tax increases and spending cuts that will meet the president's goal of reducing the deficit by $500 billion over five years. But it was unclear last night whether the Democrats would be able to agree on an alternative energy tax.

Louisiana Sen. John B. Breaux, who has been trying to mediate a compromise between the White House and his conservative Democratic colleagues, is expected to unveil a plan this morning to replace the Btu tax with a more modest levy on the value of fuel.

Mr. Clinton had already agreed to accept more spending cuts and a reduction of at least one-third in the Btu tax, which as it was passed by the House two weeks ago would have raised $72 billion over five years.

But the exact form of the new energy tax and the nature of the additional spending cuts required to make up for any reduction in its revenue-raising scope were still the subject of great debate.

"Exactly how it's structured and what it's called in the final Senate version is something that will be worked out in the Senate," White House press secretary Dee Dee Myers told reporters yesterday.

The term "Btu tax" was officially dropped from the White House vocabulary yesterday.

"I don't want to get into the name game," the president told reporters yesterday.

Over the next week, the senators will be embroiled in intense and intricate negotiations aimed at stitching together a compromise between conservatives, who vigorously opposed Mr. Clinton's Btu tax, and liberals, who are not willing to accept deep enough spending cuts to eliminate the tax increase entirely.


"It's sort of a rolling chit-chat," said Sen. Barbara A. Mikulski, a Maryland Democrat who is alarmed that major changes are being made in the bill without hearings.

Nearly all the haggling over the tax bill is now going on senator-to-senator, with administration officials hovering nearby for consultation.

Mr. Breaux, an influential member of the Finance Committee, favors a $40 billion "transportation" tax that would be similar to a gasoline tax except that it would be expanded to include fuel used by other kinds of transportation.

His plan calls for a 7.5 percent tax on fuel, which he says would be simpler to collect than a Btu tax. Because it would not affect manufacturing, it would not be vulnerable to the kinds of special interest exemptions from the Btu tax sought by industries.

After meeting yesterday with nearly a dozen of his moderate to conservative colleagues, Senate Democratic leaders and administration officials, Mr. Breaux said that he will offer the plan today. But he did not claim to have their endorsements.

"I just want to get it out there for people to talk about it," Mr. Breaux told reporters.


Mr. Breaux also is calling for an additional $30 billion in spending cuts, mostly from Medicare and Medicaid. He would raise the Medicare premiums for the wealthy and charge co-payments for home health care. He would also deny Medicaid benefits to illegal aliens.

Sen. Daniel P. Moynihan, the New York Democrat who chairs the Senate Finance Committee, talked over the weekend about an additional $51 billion in cuts, of which $35 billion would come from Medicare.

Despite Mr. Clinton's new willingness to accept few tax increases and deeper spending cuts, he still has no chance of winning Republican support for his program.

Senate Minority Leader Bob Dole of Kansas said at the White House yesterday that the Democrats are still putting too great an emphasis on raising taxes, which voters in the Texas Senate race last weekend strongly indicated they don't want.

"If he [Clinton] didn't get the message [after Texas], he'd better get a hearing aid," Mr. Dole said after the meeting at the White House yesterday. "The results were loud and clear."

But Senate Democrats, who lost a colleague in the Texas contest, are not deaf to the results. They are busily scouring Mr. Clinton's budget bill to find new areas for spending cuts.


Prime candidates were offered by some senators at a Democratic caucus meeting yesterday, including some tax breaks for business included in the House version of the bill and two costly science projects that will come up for reconsideration in the fall -- the space station and the superconducting supercollider. The two projects would cost more than $3 billion this year alone.