Sen. Hutchison calls for suspension of federal gas taxes

Sunday, June 25th 2000, 12:00 am

By: News On 6

WASHINGTON - Sen. Kay Bailey Hutchison, a Republican from oil-rich Texas, said Sunday that Congress should suspend the 18.4-cent per gallon federal gasoline tax for the summer because of increasing pump prices.

A smaller temporary tax rollback died in the Senate in April when the rise in gas prices slowed and oil-producing nations agreed to increase their output.

"I think part of a package that we should put forward in Congress is short-term fixes like relief from gasoline taxes until we stabilize these prices and then some longer term fixes," Mrs. Hutchinson said on Fox News Sunday.

In the Midwest, gas prices top $2 per gallon in some spots. Indiana Gov. Frank O'Bannon has suspended the state sales tax on gasoline for 60 days. The Illinois Legislature will meet in special session this week to discuss repealing or suspending the state's 5 percent sales tax on fuel.

Legislation introduced in Congress earlier this year would have rolled back 4.3 cents of the 18.4-cent federal tax for the rest of the year and suspended the entire tax if and when average prices exceeded $2 a gallon.

The issue lost momentum because the price rise slowed in the spring and oil-producing nations in the Middle East bowed to U.S. pressure to increase the oil supply.

Since then, prices have climbed again, affecting summer travelers and becoming an issue in the presidential campaign.

Mrs. Hutchison, an ally of Republican candidate George W. Bush, the Texas governor, said a temporary repeal of the entire federal tax could ease the burden.

"I think everyone thinks that this is going to stabilize by the fall, so if we could go through the summer when people are taking their vacations, I think we should do that," she said.

Mrs. Hutchinson also contended that the use of cleaner-burning reformulated gasoline was adding as much as 25 cents per gallon.

Mr. Bush and other Republicans fault the Environmental Protection Agency for requiring that the areas of the country with the worst smog problems use ethanol-blended gas. Clinton administration critics also say the White House has not done enough to persuade the 11-member Organization of the Petroleum Exporting Countries to raise production levels.

Vice President Al Gore and other Democrats blame the big oil companies, saying they are maximizing profits at the expense of consumers. President Clinton has indicated that he suspects possible price gouging by the industry. The Federal Trade Commission is investigating.

Sen. Pete Domenici, R-N.M., said on CNN's Late Edition that the administration is using the oil industry as a "guinea pig."

"The chickens are coming home to roost for this administration, 7 1/2 years of no energy policy," he said.

Sen. Tom Harkin, D-Iowa, defended the use of corn-based ethanol, arguing that it is "actually cheaper" than conventional gasoline. He said it is unfair to blame farmers in ethanol-producing states such as his, at a time when he said oil company profits were soaring.

Mrs. Hutchinson countered that the reason it appears oil companies are making money is because they had to settle for bare minimum profits two years ago.

"You're comparing it to $10-a-barrel oil, which drove half our little guys (oil producers) out of the market," she said. "They no longer even produce."

But Sen. Carl Levin, D-Mich., said he can see no reason why prices have risen above $2 a gallon in parts of Michigan where there is no ethanol requirement.

"There is absolutely no economic justification for these prices," Mr. Levin said on CNN. "In my home state Michigan, we can't find any reason except really gouging as far as I'm concerned because if you look at the explanations for it, none of them wash."