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commitments of research and development expenditures by private. industry, is obviously seriously hampered by uncertainty as to whether nonleaded or low lead gasoline will be generally available in the future.

Lead additives are used by refiners as the cheapest way to increase the octane rating of their gasoline. If the lead were to be removed from motor fuels, additional octane could be provided only by higher concentration of more expensive blending components. Thus, there is at present a clear economic disincentive to removing the lead additives from gasoline. This bill is designed to remove this present competitive price advantage of the less desirable fuel by imposing an additional tax on the leaded gasoline which will eliminate the cost advantage of using lead.

It would not suffice for this Congress to announce, even through legislation with a postponed effective date, that it will require or encourage manufacturers of gasoline to produce an unleaded fuel at that time in the future when advanced emission control devices are expected to be generally available. The automotive and petroleum industries must make final irrevocable decisions by early 1971 at the latest as to fuel and engine requirements for the 1975 model year (the Fall of 1974) when proposed national auto exhaust emission standards call for limits on emissions. There must be assurance now that unleaded gasoline will be available at that time so that the emission control systems will operate effectively and thus can be incorporated now in the automobile designs.

Thus, the conversion to unleaded gasoline must begin at once. Such conversion can be accomplished most effectively by a tax incentive which removes the cost advantage of using lead and thus encourages each gasoline refiner to accomplish the transition as quickly as possible without establishing absolute and inflexible requirements.

It is also important to have unleaded gasoline generally available in advance of the target dates for federal emission control requirements so that automobile designers have the option of using emission control devices to enable them to meet the developing state emission standards; and, probably more importantly, to enable them to test the performance of new emission control devices manufactured under actual high volume conditions. Simulated laboratory testing does not guarantee equivalent performance in the field.

Requirements which are only to take effect at some future date too often must be extended and re-extended as the affected parties find themselves unprepared to meet the requirements when that future date arrives. A tax incentive provision, made operative now, avoids this problem. It adequately reduces the cost advantage of using lead, so that each refiner will achieve the conversion on a basis suited to his particular needs. Competitive pressures will insure that a conversion is made at a reasonably early date, and these pressures will be a sufficient constraint to assure developers of the emission control systems that unleaded gasoline will be available in time so that their equipment may be put into operation as soon as development is completed.

The immediate beneficial effect to the environment of removing lead from gasoline is an equally important consideration. Hydrocarbon emission levels from cars presently on the road are directly related to the level of lead additives in the fuel. Estimates of the increment caused by leaded fuels vary from 7 to 20 percent. Further, at least 30 percent of the particulate emissions (solid inaterials) of engine


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te | exhausts consists of lead. We must take account of the undeniable

although admittedly unmeasurable--adverse effects of this lead level on the health of our population. There are many recognized health

authorities who argue that the possible health hazards of increased ed lead concentration in the atmosphere due to emissions of lead salts

from cars, more than justifies, solely on the basis of information alre ready available, any action which may be taken to encourage a switch ad to unleaded fuels. Evaluation of these data is continuing, but we

cannot continue to tolerate this clear and present danger to our national health level.

For these reasons, the tax on lead in gasoline is an extremely important part of the Administration's program to improve the quality of our environment.

It is estimated that the proposed tax will result in a first year revenue gain of approximately $1.6 billion. This amount will diminish as the incentive takes effect and lead free or low level leaded gasoline is

successfully developed. he The proposed tax would be imposed on the sale by the manufacturer

or importer of lead additives which are used in motor fuels. In order to on

prevent possible circumvention of the tax, importer would be defined

to include an importer of gasoline containing lead additives. The tax is

would apply to lead additives in gasoline used in all gasoline engines although its primary impact would be on automotive fuel. The tax would be imposed on the manufacturer's sale of lead additives after July 31, 1970. To bring the tax fully into play at that date and to discourage possible stockpiling of tax free lead additives, a floor stock

tax would be imposed on all inventories of lead additives held by any ly person other than the manufacturer or importer on August 1, 1970. S.

This floor stock tax would be in the same amount and measured in ole

the same manner as the tax on the sale by the manufacturer of lead nts

additives. rol

In order to prevent the tax from causing undue hardships on the od- part of smaller refiners of gasoline, it is proposed that each separate

company (but only one for an affiliated group) engaged in the refining der

business be permitted to use, free of tax, additives containing up to 1,000,000 pounds of lead during the first year the tax is in effect. This amount would be decreased by 200,000 pounds annually until 1976 when all lead contained in such additives would be fully taxable. The figure of 1,000,000 pounds is based upon the average amount of lead in additives that is believed to be used by a typical independent refinery. This level is based on the criteria used by the Small Business Administration for distinguishing small refiners eligible for set-asides for contracts with the Department of Defense. Although each such refiner would be able to use additives containing up to 1,000,000 pounds of lead, the bill limits this allowance to the amount of additives containing no more lead than that contained in the additives actually

used during the year preceding August 1, 1970. the effective date of 12

the tax, or if greater, the average of the three years preceding that date. In this manner the possibility of small refiners profiting by selling unused tax free additives to other refiners will be avoided.

I urge the Congress to give each of these three important recommendations of the President your immediate attention. Sincerely yours,

(S) David M. KENNEDY.


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50-374 0 - 70 - 3

A BILL To amend the Internal Revenue Code of 1954 to extend excise taxes on

communication services and on automobiles

Be it enacted by the Senate and the House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE, ETC.

(a) Short Title.—This Act may be cited as the "Excise Tax Extension Act of 1970”.

(b) Amendment of 1954 Code.--Except as otherwise expressly provided, whenever in this Act an amendment is expressed in terms of an amendment to a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1954. SEC. 2. CONTINUATION OF EXCISE TAXES ON COMMUNI


(1) In general.—Section 4061(a)(2)(A) (relating to tax on passenger automobiles, etc.) is amended to read as follows: (A) Articles enumerated in subparagraph (B) are taxable at whichever of the following rates is applicable: "If the article is sold

The tax rate is Before January 1, 1972..

7 percent During 1972.

5 percent During 1973

3 percent During 1974.

1 percent The tax imposed by this subsection shall not apply with respect to articles enumerated in subparagraph (B) which are sold by the manufacturer, producer, or importer, after December 31,

1974." (2) Conforming Amendment.- Section 6412(a)(1) (relating to floor stocks refunds on passenger automobiles, etc.) is amended by striking out "January 1, 1971, January 1, 1972, January 1, 1973, or January 1, 1974”, and inserting in lieu thereof January 1, 1972, January 1, 1973, January 1, 1974, or January 1, 1975".

(b) Communications Services,

(1) Continuation of Tax.-Section 4251(a)(2) (relating to tax on certain communications services) is amended by striking out the table and inserting in lieu thereof the following table: "Amounts paid pursuant to bills first rendered

PercentBefore January 1, 1972..

10 During 1972

5 During 1973

3 During 1974.

1”. (2) Conforming Amendment.- Section 4251(b) (relating to termination of tax) is amended by striking out “January 1, 1974”, and inserting in lieu thereof “January 1, 1975”.



(3) Repeal of Subchapter B of Chapter 33.—Section 105(b)(3) of the Revenue and Expenditure Control Act of 1968 (82 Stat. 266) is amended to read as follows:

"(3) Repeal of Subchapter B of Chapter 33.-Effective with respect to amounts paid pursuant to bills first rendered on or after January 1, 1975, subchapter B of chapter 33 (relating to the tax on communications) is repealed. For purposes of the preceding sentence, in the case of communications services rendered before November 1, 1974, for which a bill has not been rendered before January 1, 1975, a bill shall be treated as having been first rendered on December 31, 1974. Effective January 1, 1975, the table of subchapters for chapter 33 is amended by striking out the item relating to such subchapter B."

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