User Charges for Port Cost Recovery: the US Harbour Maintenance Tax Controversy
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POLICY PERSPECTIVES User Charges for Port Cost Recovery: the US Harbour Maintenance Tax Controversy SHASHI KUMAR1 1
Loeb-Sullivan School, Maine Maritime Academy, Castine, ME 04420, USA. E-mail: [email protected]
The US incurs significant costs in order to maintain its ports and harbours. The harbour maintenance tax, introduced in 1986 under the Reagan-era overall initiative to cut back the average tax burden, has been controversial since its inception. Its imposition on US exports was declared illegal by the Supreme Court. A proposal by the Clinton administration to introduce a harbour services user fee did not gain the support of stakeholders and thus the earlier status quo continues today with the nation's trading partners protesting vehemently. The paper analyses recent US Army Corps of Engineers data on harbour maintenance expenses in the Port of New York and New Jersey and proposes a simple yet realistic user fee model, radically different from any previous proposal, that would comply with the US Supreme Court's constitutionality test while imposing a relatively minor burden on port users. In addition, using the US as an example, the paper contributes to the general discussion on infrastructure pricing and cost recovery through user charges and in this way it addresses, albeit on the fringe, broader public policy issues such as those of mandated taxes and private versus public interest. International Journal of Maritime Economics (2002) 4, 149-163. doi:10.1057/palgrave.ijme.9100040
Keywords: Harbour maintenance tax; port user fees; harbour services fee; harbour maintenance trust fund; Army Corps of Engineers; US federal assessments.
Shashi Kumar User Charges for Port Cost Recovery
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INT RODUCT ION The US is often ranked as prime example of a market-oriented economy. It is a global leader in country rankings for productivity, efficiency and a laissez faire market environment besides being the world's largest exporter and importer. However, it is rarely noticed that the commercial maritime industry1 in the nation is exposed to a multitude of federal assessments that amount to substantial sums of money per annum. The purpose of this paper is to scrutinise one specific assessment, the US Harbor Maintenance Tax (HMT), a controversial provision that has caught the attention of the nation's trading partners as well as that of its own business and maritime community. The paper discusses the continuing controversy over the HMT and the proposed alternative funding mechanisms. It concludes by providing the rationale for a new user fee model that would hopefully encourage a workable outcome.
BACKG R OUND ON US FEDERAL A SSESSMENTS Various agencies of the US federal government levy taxes and fees on the industry for reasons ranging from customs duties to tariff filing. Currently, 11 US federal agencies levy 124 different assessments on the industry in comparison to the 119 that were levied in 1992. GAO statistics indicate that since fiscal year 1992, 50 new assessments have been levied, 45 previous assessments have
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