President Says He May Accept Oil Import Fee

By ROBERT A. ROSENBLATT

Feb. 5, 1986 12 AM PT

Times Staff Writer

WASHINGTON — Signaling a change in Administration policy, President Reagan said Tuesday that he might accept an oil import fee but insisted that the revenues raised should be used only to help offset any income tax cuts enacted under his tax overhaul program.

But Senate Majority Leader Bob Dole (R-Kan.), bluntly disagreeing with the White House, immediately insisted that any funds raised from such a fee should be used to reduce the huge federal budget deficit.

The fee could raise the price of gasoline, heating oil and other petroleum products, with the precise amount depending on competition at the retail level, officials said. Prices of those products have been falling because of sharp declines in crude oil prices. According to Administration estimates, a $5-a-barrel fee on all oil imports should produce about $8 billion in revenues.

A Shift in Position

In the past, Reagan has consistently opposed any suggestions in Congress that new taxes be levied either as part of a tax revision bill or to reduce the deficit. As recently as Monday night, Secretary of Energy John S. Herrington declared flatly: “An oil import fee is a tax. I don’t know how you spell it out any other way. The President is opposed to it.”

But Reagan shifted his position abruptly Tuesday when he told reporters that an oil import fee is “under consideration as part of the tax reform.”

Reagan is pushing hard for tax legislation that would increase the personal exemption--now $1,040 --to $2,000 for most taxpayers and would restore many of the business incentives eliminated in the tax overhaul bill passed by the House in December.

Those tax savings would drain revenues from the Treasury, and the President apparently is willing to accept the oil import fee as a way to regain revenues.

However, Reagan said, “the ultimate goal, of course, would be tax neutrality”--meaning that the government would collect the same amount of money--and the oil import fee would be imposed only “to offset” changes in the tax bill.

Dole States Position

Dole, however, said that the revenues raised by the fee should be “more appropriately reserved for budget deficits.”

Moreover, “if you’ve got two committees looking at the same tomato, it may be cause for concern,” said Dole, referring to the Senate Finance Committee, which is struggling with tax revision, and the Budget Committee, which is worrying about the deficit.

The President’s change of heart puts him in agreement with Finance Committee Chairman Bob Packwood (R-Ore.), who favors an oil import fee to make up the funds that would be lost by lowering individual tax rates and retaining business incentives.

Budget Committee Chairman Pete V. Domenici (R-N.M.), meanwhile, shares Dole’s belief that the funds should be applied toward easing the deficit squeeze.

U.S. Oilmen Would Gain

A fee on oil imports would increase the price of all petroleum products in the United States, varying from gasoline to heating oil and chemicals. The fee would drive up the price of imported petroleum, while domestic oil would also rise to that level, providing new revenues for American oil producers, who have been hurt by falling prices. A $5 fee would increase the cost of a gallon of gasoline at the pump by about 10 cents.

The fee would be welcomed in oil-producing states but would draw strong opposition from the Northeast, heavily dependent on home heating oil.

“There’s no way I support an import fee,” House Speaker Thomas P. (Tip) O’Neill Jr. (D-Mass.) said Tuesday. “There’s no way I believe (those of) us from the Northeast can support that.”

Although an import fee is an attractive source of revenue to help with tax revision, it can be a drag on the economy, Administration officials acknowledge. Falling oil prices in recent months have helped trim one or two percentage points from the inflation rate and helped the economy expand, a senior official said Tuesday.

“If you put an oil fee on, you negate all of that,” that official said. “So, you’re really killing the great opportunity that we have for further expansion.”

On the other hand, the same official admitted, the import fee “raises a lot of money” and would be “a more bearable type of tax.”