July 21, 2021 at 5:00 am ET
The Biden administration and Senate lawmakers have tentatively agreed on a bipartisan plan to modernize our nation’s infrastructure. That’s welcome news for Americans who rely on an effective and efficient system of roads, rails, bridges, ports and pipes. In other words, all of us. It’s a smart strategic move, too: The deal signals a recognition that keeping goods moving is a “must do” for a strong economy, a competitive U.S. manufacturing sector and future jobs growth. So far, so good.
Unfortunately, the deal includes a new tax on many of the very inputs necessary to make these vital infrastructure upgrades. The provision at issue would resurrect expired excise taxes on 42 chemicals, critical minerals and metallic elements – doubling the original rates. These so-called Superfund taxes, which expired in 1995, are distinct from the Superfund program that manages the cleanup of contaminated waste sites. Under that program, site remediation has been ongoing, most often at the expense of responsible parties, which include a variety of sources. This misguided proposal would set back many of our country’s priorities.
For manufacturers of the targeted materials and local communities, impacts would be significant. An analysis published by American Chemistry Council economists shows that the added costs could lead to the shutdown of 44 plants and jeopardize operations at six more while giving an unfair advantage to foreign producers such as China. This after a decade in which the U.S. chemical industry has been an engine of economic growth and employment due to our investment in new factories and expansions.
Cities and towns along the Gulf Coast, where most U.S. basic petrochemicals manufacturing happens, are projected to lose production capacity and jobs to competitors abroad due to the new costs and their effects. Foreign chemical makers can capitalize on economies of scale in ocean transport and may already have lower transport costs to key East Coast markets. Communities will also lose income and sales tax revenue linked to the curtailed production. There will be ripple effects nationwide.
American consumers will pay more for goods made with the targeted materials. The chemicals and other materials identified for taxation are building blocks for final products such as pharmaceuticals, semiconductors, solar panels, refrigerants, detergents, steel, plastics, wood products, copper, cement, glass, pesticides, fungicides, rubber, paints and coatings, batteries, ceramics, textiles, light bulbs and electronics. Many of the components affected are used for renewable energy systems, energy efficiency, water delivery and disinfection and electric vehicle infrastructure. This is not the way to jumpstart economic recovery, tame inflation, strengthen supply chains or create a cleaner energy future.
It’s no secret that prices are up for everyday items such as groceries, gas, vehicles, furniture, clothing, lumber and electronics. Supply chains are squeezed, and shortages are still a concern. By taxing the components of basic products, Congress would be asking consumers to pay more for essential items that are already stretching their household budgets. At a macro level, the new taxes would add pricing pressure when inflation is rising at its fastest rate since 2008 – 5.4 percent in June from the same month last year, the Labor Department reported earlier this month.
Proponents of reviving Superfund excise taxes say the funds are needed for site remediation, but Superfund cleanup dollars are appropriated annually by Congress. The level of funds in the “Trust Fund” don’t control the pace of cleanup. Money in the Trust Fund is often used for other purposes and has in the past suffered from waste and contractor abuse. Other supporters of the tax say chemical makers should pay a “user fee,” but ACC member company facilities make up less than 2 percent of sites on the National Priorities List.
Congress and the administration have done a praiseworthy job finding bipartisan middle ground on infrastructure. However, as currently drafted, the Bipartisan Infrastructure Framework would result in new taxes on American consumers, breaking the pledge many lawmakers have made. It also disregards the important contributions and constructive engagement of key stakeholders. Congress and the administration must find a way to forestall this short-sighted and far-reaching action.
In thoroughbred racing, a better horse is sometimes asked to carry more weight to give it a disadvantage when racing against slower horses. The skill in betting on such a contest is in predicting which horse can overcome its assigned burden. While this tactic may make for a more exciting race, it doesn’t belong in our infrastructure policy. By levying harmful and unnecessary new taxes on an industry that’s positioned near the start of the manufacturing supply chain, this proposal bets against the United States right out of the gate.
Chris Jahn is president and CEO of the American Chemistry Council.
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