WASHINGTON (MNI) - Reducing energy subsidies, including raising taxes to match the actual costs of energy consumption, could be included in the United States' attempt to fix the deficit, said an International Monetary Fund official Wednesday.
"One possible source of additional revenue would be further taxation of energy products in the United States," said Director of the IMF Fiscal Affairs Department Carlo Cottarelli, in a conference call focusing on an IMF study of energy subsidies, also released Wednesday.
This "could be a key component of a fiscal adjustment strategy," said Cottarelli, who pointed out that too low energy taxes are a type of subsidy.
For advanced economies, Cottarelli explained, "The main component of energy subsidies comes from the lack of taxation of externalities," and "Energy taxation is too low in most advanced economies. Current taxation is not enough to cover these externalities, such as environmental costs."
According to the IMF study, the United States is the top energy subsidizer in the world, in absolute terms, with $502 billion in total subsidies annually, with these "post-tax subsidies" account for a most of the total.
U.S. post-tax petroleum subsidies - when "taxes are below their efficient level" - were estimated at accounting for 2.42% of GDP and 7.7% of government revenues for 2011, trailing only Luxembourg as the highest rates of any advanced economy.
However, because these types of subsidies don't show up in the balance sheet, the costs aren't as evident, said Cottarelli.
Comparatively, pre-tax petroleum subsidies, defined as when the price paid for a good is below supply costs, accounted for 0.05% of U.S. GDP in 2011 and 0.17% of total government revenues.
"It is a major fiscal issue, as fiscal imbalances are important for the overall world economy," continued Cottarelli.
--MNI Washington Bureau; tel: +1 202-371-2121; email: jnewell@mni-news.com
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