Budget Proposal Suggests Cutting Harbor Maintenance Tax

The Trump administration floated a reduction to the Harbor Maintenance Tax in its recently released budget proposals. The administration called for collecting $300 million less per year in HMT because more money has been collected than is spent on harbor upkeep in recent years. The budget proposal says that if the lower level of harbor maintenance tax is collected, it "would provide greater flexibility for individual ports to establish appropriate fee structures for services they provide, in order to help finance their capital and operating expenses on their own."

The proposal is contrary to the trend of the last four years, which has been to spend more money each year on the harbors. The Water Resources Reform and Development Act, passed in 2014, set spending targets so that the country would eventually reach spending and tax collection parity in 2025 (see 14061102). Steve Fisher, executive director of the American Great Lakes Ports Association, said the Trump budget proposal not only contradicts congressional action in the recent past, it "also conflicts with the administration’s own infrastructure goals, which is to increase infrastructure investment, not decrease infrastructure investment."

The infrastructure spending package proposes more than $1 trillion for projects but only $200 million in federal contributions. "They’re looking for ways to come up with more money, I don’t know why we’d be cutting back on an existing source of infrastructure funding," he said. The budget request for fiscal year 2019 was released earlier this week (see 1802120017).

The offices of several House Ways and Means Committee members and the Appropriations Committee did not immediately comment about this aspect of the president's budget proposal. If the tax were to be lowered, that would move through Ways and Means; spending levels are determined by appropriators. "I think appropriators will not be receptive to this budget proposal," Fisher said. "Congress has been on a very clear path since 2014, and appropriators have stuck with that. Even with sequestration."

Sequestration was a system that made across-the-board cuts to spending. The most recent budget deal, which will determine spending in this fiscal year and in FY19, ignored those caps. Fisher said spending on the ports was $1.31 billion in 2017, and the appropriations bills that passed the House and Senate earlier this fiscal year set a $1.34 billion level for 2018.

Obviously, the ports would like to have more spent on them, but Fisher said there's not a lobbying push on the other side to reduce the tax, which was increased to $0.125 per $100 of cargo value in 1990. "I have seen no evidence importers are out there trying to lower the harbor maintenance tax. We’ve heard very little in complaints," he said. "The opposite was happening, business groups were saying: If we’re going to pay the tax, let’s use it for what it’s supposed to. They were not for lowering the tax."

Heather Stebbings, government relations director for the Pacific Northwest Waterways Association, said she's been getting questions from ports officials, and they want to know who lobbied for the tax cut. "I have not heard who pushed this," she said. The association's staff is still digesting the budget and the just-released infrastructure proposal, so Stebbings said she hasn't had the chance to talk to appropriators about their views of the tax cut.

The ports of Seattle and Tacoma are donor ports, which means the importers who bring goods in through their harbors pay more in taxes than the ports have in dredging needs. The 2014 reform bill addressed the issue somewhat, and Tacoma officials welcomed that, though they still complained that the harbor maintenance tax structure is not as useful for naturally deep water ports. Localizing fees would address that issue more directly than the WRRDA did. Even so, "I don’t know how supportive they would be of essentially having to levy their own tax on customers," Stebbings said.