An end to Canadian tax-dodging at our expense?
Port of Seattle Credit: yummifruitbat
It's easy to get so used to complaining about something that you stop believing it will ever actually change. Like, “When am I ever going to get sidewalks in my north Seattle neighborhood?” or “When will all bathrooms finally switch to that amazing Dyson hand dryer?”
That’s how I used to feel about the Harbor Maintenance Tax (HMT), a federal tax paid by international shippers which adds $109 to each imported container that passes through Puget Sound ports. I wrote about the tax a year ago for Crosscut. It's intended to pay for the cost of operations and maintenance of federal waterways, but because Puget Sound's waterways require little maintenance and the tax only applies to imports that arrive via water (not rail or plane), it's actually driving jobs and revenue from our state and benefiting competitor ports in Canada — a problem that even the Federal Maritime Commission has highlighted. Other ports around the country (which require more maintenance) see the lion's share of benefits from the tax, while Puget Sound's ports are hit hard when shippers choose to route goods through Canada.
These are problems that have been in place for decades with little action or response. Largely because the border issue has been most problematic for the Pacific Northwest, but will require a federal solution.
This week though, Senators Patty Murray and Maria Cantwell formally introduced the Maritime Goods Movement Act, which proposes a significant overhaul of the Harbor Maintenance Tax and spending structure. The legislation would replace the current HMT with a Maritime Goods Movement User Fee on all cargo arriving in the U.S. that originates outside of North America, regardless of whether it arrives via rail, road or sea. It's a plan that would remove shippers' current incentive to route cargo through foreign ports. The new bill would also mandate full spending of the HMT fund for its intended purpose (half of it now goes to general government obligations), and give ports increased funding and flexibility around the spending of these funds.
So what gives me optimism that — after years and years of efforts to reform the HMT — this bill will actually pass? The proposed Maritime Goods Movement Act focuses on broad reforms that appeal to regions across the country — not just the PNW. For instance, ports all over the U.S. have been frustrated with the fact that only half of the approximately $1.6 billion in annual HMT collections are actually used for harbor maintenance. They are excited about the prospect of using these full funds for infrastructure projects.
Further, the incentivizing of cargo away from U.S. ports is increasingly a national issue. Growth in Mexican and northeast Canadian ports means LA/Long Beach and New York/New Jersey are seeing cargo flows shift as well. By providing a collection of solutions that address national concerns about the current HMT, the Maritime Goods Movement Act provides an opportunity to solve these problems in a way that benefits everyone.
Of course, we’re still going to need to work together to advocate successfully for these changes, and Washington state is going to be a leading voice for HMT reform. Already a large coalition of Washington ports and business and labor organizations have come together to support this effort, sending a recent letter to Washington’s Congressional delegation urging their support.
As Port of Seattle CEO Tay Yoshitani has said, “We are trying to compete with one hand tied behind our back,” at a time when foreign competition is most fierce. As ports in Canada and Mexico pour investments into their infrastructures, we cannot stand by and let an outdated and ineffective tax law risk our jobs and endanger our international competitiveness.
Over the next few months, a growing coalition of businesses, labor and others from across the country will actively advocate for the HMT reforms in the Maritime Goods Movement Act. Passing HMT reform is finally in our sight, but its success depends on our ability to reach out to partners across the country and explain the shared benefits of this approach. Once that's out of the way, we can start talking about that hand dryer thing too.