A recent report from the AWO (American Waterways Operators, Inc.) detailed the current situation regarding the Highway Diesel Tax.

The AWO reported that during Omnibus Budget Reconciliation talks last year, Congress changed the highway tax collection procedures from collection at the pump to collection at the wholesale level to prevent "cheating" by highway users (the tax goes to the Highway Trust Fund). Although they exempted non-highway users such as railroads and airlines, Congress simply neglected the water transportation industry, the construction industry and the farmers. Although the tug and barge industry, the construction industry and the agricultural community did all they could to keep this unfortunate oversight from becoming law April 1, 1988, they were frustrated in their attempts.

Thus, on April 1, the inland and coastal barge and towing industry began paying an additional 15.1 cents per gallon for diesel fuel—of which the industry consumes up to 2 billion gallons annually. (This is on top of the 10 cent per gallon diesel fuel user tax which the industry currently pays.) Although the tug and barge industry is eligible for a re- bate of these additional funds, the Treasury Department estimates that rebates could take up to 18 months. This prompted the Florida Times-Union to write "the maritime industry is about to provide the federal government with a $360- million interest-free loan." And, The Wall Street Journal wrote, "farmers and other off-road users of diesel fuel who are exempt from the tax are outraged by the provision because it requires them first to pay the tax then to file for refunds." Therefore, the industry—one that is only now beginning to come out of a crushing economic depression— will be floating a $240 to $360-million interest-free loan to the federal government, and experiencing severe and crippling cashflow problems that could well ruin many, many companies.

Other publications seem to concur with the water transportation's position.

"Big brother in Washington often works in strange ways to dip into our pockets—as the U.S. tug and barge industry has been made painfully aware."—The Mobile Register "Waterway operators are in a state of high anxiety over a recently implemented requirement changing the point of collection of a 15-centa- gallon excise tax on diesel fuel."— The Journal of Commerce "The barge industry is caught in a Catch-22 position involving excise taxes that it is legally required to pay, even though those payments resulted from an acknowledged mistake by Congress."—Traffic World The inland and coastal tug and barge industry is looking for Congress to help now.

The Senate Finance Committee has already moved to exempt water carriers from the requirement that this tax be paid up front. The House Ways and Means Committee has begun to look at the problem too.

But they left for recess before finishing the job. Payment began on April 1. Although over 20 bills have been introduced to correct this inequity, nothing has been done to move forward. Every day, barge and towing companies are being economically drained.

Both Sen. Lloyd Bentsen (D.- Texas), Senate Finance Committee Chairman, and Rep. Dan Rostenkowski (D.-Ill.), House Ways and Means Committee Chairman, asked Treasury Secretary James Baker to delay implementation of the payment requirement for non-highway users, giving Congress time to find " effective but practical method of collection of the diesel excise tax," as Chairman Rostenkowski said in his letter to Secretary Baker.

The Secretary's response was, to paraphrase, "you guys fouled it up, now you guys fix it." The Internal Revenue Service recently decided to allow certain waterway operators (on the inland waterways alone) to offset payment of the inland waterway fuel tax against the new tax payments for the highway diesel fuel tax. However, this provides no relief for the hundreds of coastal water transportation companies, and only partial relief for others.

The tug and barge, along with hundreds of thousands of farmers and construction workers, are stuck in a classic bureaucratic nightmare.

To the extent possible, they are mobilizing their member companies to plead their case on Capitol Hill.

No other issue in recent memory has cut so deeply into the newly jumpstarted economic heart of the industry.

Maritime Reporter Magazine, page 44,  Jun 1988

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Maritime Reporter

First published in 1881 Maritime Reporter is the world's largest audited circulation publication serving the global maritime industry.