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$14.5 billion tax on manufacturers, producers and importers in bipartisan infrastructure plan

August 4, 2021 - We said in a previous article we would keep you posted as more details regarding how Congress wants us to pay for the highly touted "bipartisan infrastructure plan."


We want to be very clear that federal investment in infrastructure such as roads and bridges, rail, ports and other modes of transportation would be greatly appreciated by everyone, including our business members. Manufacturers and all types of businesses need reliable and safe transportation infrastructure to move goods and people in and out of our facilities and places of business. We certainly support that part of the infrastructure bill.


But as happens all too often with legislation, the good of the federal investment in transportation infrastructure is chocked full of many other provisions, including revival of an outdated tax on chemicals: the Superfund Excise Taxes. Buried on page 2406 of the 2702-page bill are details of the tax.


SUPERFUND EXCISE TAXES

The tax previously expired January 1, 1996, so we should really call this tax that expired a quarter century ago a new tax. The Joint Committee on Taxation issued its estimate of the impact of the tax provisions in H.R. 3684, the bill containing the bipartisan infrastructure compromise, on August 2, 2021.


According to this report, the tax would generate $453 million in FY 2022, $1.2 billion in FY 2023, and around $1.5 - 1.8 billion each fiscal year from FY 2024 - FY 2031, for a total of $14.450 billion in new taxes. The tax would be paid by manufacturers, producers or importers of the following chemicals at the following rates, which are double the rates of the previously expired tax:


The new tax is the following amount per ton of the following chemicals:

Acetylene $9.74

Benzene $9.74

Butane $9.74

Butylene $9.74

Butadiene $9.74

Ethylene $9.74

Methane $6.88

Naphthalene $9.74

Propylene $9.74

Toluene $9.74

Xylene $9.74

Ammonia $5.28

Antimony $8.90

Antimony trioxide $7.50

Arsenic $8.90

Arsenic trioxide $6.82

Barium sulfide $4.60

Bromine $8.90

Cadmium $8.90

Chlorine $5.40

Chromium $8.90

Chromite $3.04

Potassium dichromate $3.38

Sodium dichromate $3.74

Cobalt $8.90

Cupric sulfate $3.74

Cupric oxide $7.18

Cuprous oxide $7.94

Hydrochloric acid $0.58

Hydrogen fluoride $8.46

Lead oxide $8.28

Mercury $8.90

Nickel $8.90

Phosphorus $8.90

Stannous chloride $5.70

Stannic chloride $4.24

Zinc chloride $4.44

Zinc sulfate $3.80

Potassium hydroxide $0.44

Sodium hydroxide $0.56

Sulfuric acid $0.52

Nitric acid $0.48

SOURCE: Congress of United States, Joint Committee on Taxation, JCX-33-21 (Aug. 2, 2021)


If these taxes are implemented, not only would manufacturers, producers and importers of these chemicals face higher taxes, but so would manufacturers using these chemicals to produce other products. Eventually, these taxes would be reflected in prices of consumer products.


PREVAILING WAGE

Prevailing wages must be paid to "all laborers and mechanics employed by contractors or subcontractors in the performance of construction, alteration, or repair work on a project assisted in whole or in part by funding" provided by the bill.


UNEMPLOYMENT INSURANCE PROGRAM:

It appears the federal government will be using approximately $50 billion in savings resulting from states, like Missouri, that ended the federal pandemic unemployment benefits early to help pay for this bill.


EXTEND EXPIRING CUSTOMS USER FEES:

Customs fees that would otherwise expire September 30, 2030 are extended until September 30, 2031.


EXTEND MANDATORY SEQUESTER:

The bill would extend the sequestration, or budget reductions, in several ways.


First, nonexempt defense spending and nonexempt non-defense spending would continue for an additional year. The sequestration was originally to expire in 2030 and the bill extends that date to 2031. The amounts of the reductions would be the same as in FY 2021.


Medicare spending reductions would be doubled from 2% to 4% for each fiscal year through 2031. Currently, the spending is reduced by 2% for the first 5 and a half months, 4% for the following 6 months, and zero for the remaining half month. The bill would make the Medicare reductions 4% for the entire fiscal year. Only federal law could be this complicated!


We will stay tuned and keep you posted of any news regarding the details of the bipartisan infrastructure plan. Hopefully someone will be able to answer these questions before the U.S. Senate passes this bill. The Hill reports there are nearly 300 amendments filed, so the text is sure to change. And by the way, President Biden, Speaker Pelosi and Sen. Bernie Sanders have been very clear that the bipartisan infrastructure plan is linked to the Democrat-only spending package that carries a current price tag of $3.1 trillion. Click HERE for Politico's article on the subject.

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