Page 5: of Maritime Reporter Magazine (April 1993)

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A 525 percent tax increase on fuel could leave the inland waterways transporters high and dry.

Will New Taxes Sink Barge Industry?

Clinton Plan Would Impose 525 Percent Increase In Waterway Fuel Tax

By Greg Trauthwein

Included in President Clinton's budget-cutting, tax-raising program is a new inland waterways fuel tax which would raise the existing tax of 17 cents per gallon to $1.19 per gal- lon by 1997. The increase in tax is scheduled to be phased in over four years, beginning in 1994 with a 10 cent/gallon hike, followed by raises of 15 cents in 1995, 20 cents in 1996 and 55 cents in 1997. The proposal would bring in an estimated $820 million over the four year period.

Also included in the President's re- vitalization package is a broad-based energy tax, or BTU tax, which is estimated to increase the cost of diesel fuel an additional eight to 10 cents per gallon. "We operate vessels on inland wa- terways, the coast and the ocean, and use about 35 million gallons of fuel per year," said Mark Buese, vice president, Houston-based Kirby

Corp. "Of that, 23 million gallons would be subject to the inland wa- .erways user fee. We now pay .17 :ents per gallon tax, which equates o $3.9 million per year. Under the lew plan, our tax would rise to $27 lillion per year. The $23 million ifference exceeds our pretax oper- ating profit." Fred C. Raskin, presi- dent of Cincinnati-based Ohio River

Co., came to a similar, ominous con- clusion: "We use 50 million gallons per year, you do the math" (We did, and it equals $59.5 million), Mr.

Raskin said. "Obviously, it repre- sents a large cost impact."

Currently, The American Water- ways Operators (AWO) is preparing to fight the tax. The rationale for the tax is, reportedly, the

Administration's belief that since the inland waterways system was built for commercial navigation ben- eficiaries, they should pay all main- tenance and operation costs. Be- cause the increase is called a "user fee" and not a tax, the amount is classified a savings and summarily was not listed among the administration's $240 million in tax increases.

The AWO counters, claiming that the system was created for far more than navigation, but for multiple purposes such as flood control, irri- gation, hydropower and municipal water supply. Those in the industry also claim the new tax will have more far reaching affects than just the barge industry. "With this added tax, our grain and coal exports will become non-competitive on the world market," Mr. Raskin claims. Mr.

Buese concurs, saying the tax won't have the same ramification on the carriers of petrochemical, chemical and refined products, as the compet- ing modes of transport for these com- modities are less price competitive.

But he foresees serious ramifica- tions for the carriers of agricultural products and coal.

Mr. Buese also predicts long term ramifications to the U.S.'s domestic economy. He reasons since such a large percentage of petrochemical and chemical shipments originate in the Gulf Coast region and travel upstream to manufacturers, the new tax will significantly impact the cost of raw materials delivered to the

Midwest, which in turn will ad- versely affect consumer costs and ultimately, jobs.

AWO has already initiated a com- prehensive strategy to battle the tax. Details of the program were recently delivered to AWO carrier and shipyard members. The AWO also communicated to three Cabinet

Secretaries (Transportation, Trea- sury and Agriculture) the flaws in the increase and the potential con- sequences. AWO is currently form- ing a coalition of many other af- fected industries to add resources to its lobbying efforts. "We see a tremendous inconsis- tency in the Administration," said

Mr. Buese. "They are putting money into other modes of transportation (highways, rail), but taking money from waterway transportation."

The White House has requested comments from the public on the proposed economic plan and has set up a telephone number for remarks.

Call (202) 456-1111 to voice your opinion.

Dear President Clinton...

This is a letter submitted by the AWO to Lloyd M. Bentsen, Secretary of the Treasury; Federico F. Pena,

Secretary of Transportation; and

Mike Espy, Secretary of Agricul- ture.

Americans are being asked to share in the task of equitably and responsibly reducing the soaring federal deficit. Yet the Administration's plan to impose a shocking 525 percent tax increase on the already heavily taxed inland water- way transportation industry is neither fair nor responsible. Such a strato- spheric tax increase will injure America's inland waterway transportation system far beyond what I am sure is intended.

However, its ravages will strike much further, to American consumers, to the heart of fairness, and to U.S. competi- tiveness in the international marketplace.

The inland waterways industry trans- ports 15 percent of the nation's freight, over half of all export grain, a fourth of all coal and more than 30 percent of the nation's petroleum products. Our ves- sels deliver agricultural fertilizer to farm- ers, grain to food producers and export ports, building materials to construction sites, iron and steel to factories, coal to electric generating plants, home heat- ing oil and gasoline to millions of Ameri- cans. The cargoes carried by this safe,

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