Peter Callaghan: Small fix to port tax has big benefit for Tacoma and Seattle

Staff WriterMay 20, 2014 

I guess the solution made too much sense to pass on its first try.

Congress doesn’t work that way.

Still, getting what U.S. Sens. Patty Murray and Maria Cantwell got out of a conference committee last week should be considered a significant victory.

For the first time since being created in 1986, a fee on each container unloaded at American ports can be used to offset the unintended but real ill effects of that fee. Two of the major beneficiaries are the ports of Tacoma and Seattle.

The problem with the Harbor Maintenance Tax became clear right away. The money was to pay for operation and maintenance of federal channels used by the nation’s ports. But most of the money went to river ports in the Gulf of Mexico and on the East Coast that require regular dredging.

Deep water ports like those on the West Coast require little dredging so they received little money. They call themselves “donor ports” that collect money from shipping lines (about $100 per container) but get little of it back.

Another problem recently emerged: Shipping lines importing consumer goods from Asia began avoiding the tax by using emerging ports in British Columbia and Mexico.

As this is happening, more money is needed to pay for road and rail improvements through congested port cities and to do battle with air pollution from port operations.

The problem required a congressional solution, though, because whenever California or Washington state proposed adding a state fee to cover infrastructure improvements or to combat pollution, opponents would warn that it would hurt that state’s ports. Even acting together did nothing about tax avoidance via Mexico and Canada.

The result? Taxpayers in Washington and California get to pay for transportation improvements so that consumers in the Midwest can pay less for TVs and Nikes.

Southern California consumes a significant amount of what is imported through the megaports in Los Angeles and Long Beach, though a lot moves to inland markets as well. Most of what is unloaded in Tacoma and Seattle, however, heads east on trains and trucks as quickly as possible.

As former state Senate Transportation Committee Chairwoman Mary Margaret Haugen once said, “The Port of Seattle is really the Port of Chicago. Why should people in the state of Washington be taxed for stuff going to Illinois?”

Last summer Murray and Cantwell proposed replacing the current system with a fee on all container imports to the U.S., whether they arrive at a port or turn up on a truck or train at the Canada and Mexico borders.

And the revenue could be used for more than dredging. Grants could be made to fix inland road and rail bottlenecks.

The idea has a lot of appeal. It would end a disincentive that results in more goods bound for American consumers passing through non-U.S. ports. And it would capture more of the revenue stream of those products to pay the real costs of moving them to consumers.

So it, of course, has little chance. Even though it isn’t a new fee, it fails the revenue-neutrality demand by congressional leaders because it would be collected on additional shipping. And anything that might increase costs of cheap imports draws opposition from shippers and big box retailers as well as the representatives of consumers who benefit.

A long, slow trek was expected. So last week’s deal struck by Murray and Cantwell within the broader Water Resources Reform and Development Act was unexpected and might be better than it appears because it changes nearly 30 years of status quo.

The flawed tax collection system remains in place under the bill that could pass by the end of the week. But a chunk of the money collected will flow to the big West Coast ports to pay for nondredging improvements and to offer rebates to shippers to keep them from diverting cargo north and south of the U.S. border.

It isn’t a lot — $25 million of the $800 million now distributed from the Harbor Maintenance Trust Fund — and money can’t yet be spent for inland infrastructure projects. It is, however, a start.

Murray and Cantwell will continue to work on the bigger fix to the harbor tax. But the principle has been established that the shipping revenue stream — not state taxpayers — should pay for getting goods to consumers.

Peter Callaghan: 253-597-8657 peter.callaghan@ @CallaghanPeter

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