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I W .‘ .‘- '1 i. ‘- ‘.1 _-1:‘ 2. :'‘.~,:.'/ ‘K :1 rM*<’« __ ‘ ' _ ‘ “ r : ‘ '- ‘N’: '*. ~—-9.’ ré 3 , . : ' ' "-3: ;_._, , . _ _ «.-,- £1 :2. 5, '1 ' . - .- 6. - ”-’* -: i, .9’ ': , Lfi ‘S . 1"‘ ‘ 3: I Z.11!J'”iiflWT|W 3 |l|llllJ uIIr:siii‘Tif“[gIJ @111 O1 WATERWAY USER CHARGES: THE REAGAN PROPOSALS MINI BRIEF NUMBER MB78257 AUTHOR: Stephen J Thompson Economics Division Louis Alan Talley Economics Division THE LIBRARY OF CONGRESS CONGRESSIONAL RESEARCH SERVICE MAJOR ISSUES SYSTEM DATE ORIGINATED ll/27/78 DATE UPDATED O3/O2/82 FOR ADDITIONAL INFORMATION CALL 287-5700 M0304 CRS- 1 MB78257 UPDATE-03/02/82 ISSUE DEFINITION Prior to I978, there was no waterway user charge on barge traffic on the inland waterway system. In l978 Congress passed the Inland waterways Revenue Act of I978. President Reagan has proposed raising the fuel tax rate contained in the 1978 Act. That Act, and President Reagan's proposal, are the subjects of this mini brief. BACKGROUND PRESIDENT REAGAN'S PROPOSAL In February l98l, President Reagan proposed significantly increasing the user charge on barges when they use the inland waterway system. In his Sept. 24, l98l, televised address to the Nation, he stated once again his commitment to raise the fuel tax on barges. The Administration's legislative proposal is contained in H.R. 2962, reintroduced with modifications in H.R. 4846, and in S. 8l0 introduced Mar. 26, l98l. H.R. 4846 was introduced on Oct. 27, l98l, by Mr. Howard, Mr. Roe, Mr. Clausen, and Mr. Hammerschmidt. H.R. 4846 would raise the fuel tax on barges to 15 cents per gallon until Jan. I, 1983. Annually thereafter, the tax would be adjusted using the implicit price deflator of the gross national product. On Feb. 10, l982, the Secretary of Transportation, Mr. Drew Lewis, testified before a Senate subcommittee that he would be sending Congress proposed legislation to replace the Administration's earlier request for a higher fuel tax." The new proposal is expected to request charging barge operators a basic rate of about one—tenth of a cent per dton-mile. (A ton mile is a ton of freight hauled one mile.) Mr. Lewis said that traffic on segments of the inland waterway system on which recent new construction has occurred would pay an additional ton-mile fee based on the cost of construction. He also stated that future construction costs_would be paid in full from user charges. About 85% of the cost of the new lock and first chamber at Locks and Dam 26 would be recovered from user fees, and 30% of the construction cost of the Tennessee—Tombigbee would be recovered. It has been reported that if the Administration fails to win congressional approval of its plan for user charges, DOT will close some little-used waterways to reduce expenses. THE INLAND WATERWAYS REVENUE ACT OF l978 The Inland Waterways Revenue Act of 1978, Title II of Public Law 95-502, 92 Stat. l693, was enacted on Oct. 21, 1978, and levies, for the first time, a waterway user charge on commercial freight traffic using the 25,000-mile inland waterway system. The user charge is collected in the form of a fuel tax, and is levied at four cents per gallon beginning Oct. 1, 1980, rising to six cents beginning Oct. 1, l98l, eight cents beginning Oct. 1, l983, and ten cents beginning Oct. l, 1985. President Reagan's January l98l report estimates that a tax of eight cents a gallon will raise almost $l00 million in tax revenues per year. During testimony presented to the Ways and Means Committee during the 95th CRS- 2 MB78257 UPDATE-O3/O2/82 Congress, then Secretary of Transportation, Brock Adams, stated that a fuel tax of 40 cents per gallon would recover all Federal expenditures to repair and maintain the inland waterway system and recover 50% of Federal iconstruction expenditures. The legislation authorizes a new replacement Lock and Dam 26 with greater capacity than the present facility on the Mississippi River above St. Louis, FMissouri. The levy on fuel is not dependent upon the construction of the new lock and dam, however, and construction could be delayed, or prevented, by currently pending litigation supported by some environmental and railroad interests. During Senate debate on the bill, mention was made of possible damage to the-economic health of the barge industry as a result of the tax. Mention was also made of the uncertain future of Lock and Dam 26 replacement. There was some suggestion that if the Lock and Dam 26 proposal is greatly delayed, or if there appears to be serious economic consequences of the tax on the barge industry, Congress might reconsider the levy. The 1978 Act requires an extensive study of future policy alternatives for development of the Upper Mississippi River Basin and another extensive study of the economic impact of waterway user charges on barges, trucks, railroads, and waterborne commodities. A February l98l report by the Congressional Budget Office (CBO) states that "The estimated $440 million in receipts’ for the five-year period l982-1986 will cover only six percent of projected Federal expenditures for waterway navigation proposed during the period." Section 205 of the 1978 Act required the Secretary of Transportation and the Secretary of Commerce to submit a report to Congress on the likely impact of waterway user charges. That study was released in February _l982. A complete citation to the study appears below in the references section. A PROS AND CONS OF WATERWAY USER CHARGES Rail and truck-spokesmen have long maintained that barges using the inland water system receive an unfair advantage since, until enactment of the Inland Waterways Revenue Act of 1978, no user charge was levied on waterway freight transportation for Federal construction, repair, and maintenance of the inland waterways, and provision of navigational aids. Railroads contruct, repair{,and maintain their rights-of—way and, in many cases, pay property taxes on the land and structures. Trucks contribute to the construction, repair, and maintenance of roads through various licenses and taxes, although studies by the Federal Highway Administration indicate that heavy trucks and buses do not pay their proportionate share of Federal highway costs. Barge spokesmen maintain that the tax contained in the Inland Waterways Revenue Act of l978 will likely be severely detrimental to the financial health of the barge industry, and to the industries that ship and use commodities transported on the inland waterways. Barge spokemen hold that barge transportation is the most energy—efficient mode of transportation, and that a shift of traffic to rails, as a result of the tax, would be counter productive regarding energy conservation goals. They also state that the tax will be counter productive to efforts to reduce inflation, since most commodities transported on the inland waterways are raw and semi-processed materials (such as coal and mineral ores). Higher costs on these commodities are sometimes amplified at later stages of production by percentage increases CRS- 3 MB78257 UPDATE-O3/O2/82 applied to these higher costs for raw and semflfinished materials. REVENUE ESTIMATES BASED ON A FUEL TAX OF l5 CENT PER GALLON Description Fiscal years (a) 1981 1982 l983 1984 l985 1986 Tax Revenue from User charges‘ (dollars in millions) existing legislation(b)3O 58 67 80 90 ll5 proposed increases(b) - 87 lol 70 79 58 Total 30 l45 168 150 169 173 Fuel tax rates (cents per gallon) existing legislation 4 6 6 8 '8 lo proposed level 4 l5 l5(c) l5(c) l5(c) l5(c) (a) Fiscal years begin on October l of the previous calendar year. For example, fiscal year l982 began on October l, l98l. (b) The amount of tax revenue that'would be generated under existing legislation is taken from the White House report cited below under "Source." The amount of tax revenue that would be generated under H.R. 4846, the Administration's proposed legislation, is derived by taking the tax rate of l5 cents per gallon of fuel stated in H.R. 4846 and applying it to the tax rate and estimated tax revenue under the existing legislation. It should be noted that the bill would require the l5 cent tax to be adjusted annually to reflect the impact of inflation. It should also be noted that the implicit price deflator for the gross national product is revised periodically and the bill is silent on how the fuel tax rate would be adjusted in in response to revisions in the price deflator. (c) The rate (l5 cents per gallon) is taken from the Administration's bill, H.R. 4846, and would be adjusted upward annually, to reflect inflation. This adjustment has not been taken into account in the revenue estimates. Source: U.S. The White House. Office of the Press Secretary. America's New Beginning: a Program for Economic Recovery. February l8, l98l, page 3-1, for estimates of revenue under existing legislation, and H.R. 4846 for the amount of the proposed tax. ADDITIONAL REFERENCE SOURCES Traffic World. DOT, Commerce See no Major Impact from Inland Waterway User Charges. Feb; 15, l982, pp. 39-415 Traff U.S. CRS- 4 MB78257 UPDATE-O3/O2/82 Few Solutions to waterway Problems Expected from Feb. l5, l982, PP. 30-32, 34-36. ic World. Congress This Year. Department of Transportation and Department of Commerce. Inland Waterway user Taxes and Charges. February l982. 57 p. Library of Congress. Congressional Research Service. Federal Aid to Domestic Transportation by Stephen Thompson, Barbara Maffei and William Lipford. May l6, 1977. CRS Report No. 77-1123. Upper Mississippi River Master Plan by Malcolm M. Simmons. Jan. 8, l982. CRS typed report. 23 p. waterway User Charges: Background and Analysis of Alternatives by Louis Alan Talley and Stephen J Thompson. Sept. 14, l978. CRS Report No. 78-193 E. America's Feb. 18, The White House. Office of the Press Secretary. New Beginning: a Program for Economic Recovery. l98l, pages 3-1 and 3-2. UBRARY OF ASHINGTON UNIVERSITY 911 ‘-OENS. :1 .. . “-F3‘~'a'r‘o‘-~~v--yw-. - ,:~é.;:‘§" 5"‘ ~