New 1 Percent Tax? Slim Chance

Q: A summary of a bill introduced in Congress, “The Freight Infrastructure Reinvestment Act of 2013,” H.R. 3825, just crossed my desk. If it hasn’t already crossed yours, check out the proposed “tax on taxable ground transportation of property equal to 1 percent of its fair market value.”

Quite apart from the obvious question as to whether the term “its” in that context is intended as a reference to the “fair market value” of the “property” being “transported,” or to the “fair market value” of the “taxable ground transportation” itself (certainly a novel locution for possibly overcharged or undercharged movements), this seems to add a new tax on an already overloaded business community.

Could you discuss this with a view toward how likely this is to actually happen and whether the burden on shippers would be fair.

A: Well, there actually is such a bill pending in the House of Representatives.

The legislation was introduced by Rep. Adam Smith, D-Wash., with three or four co-sponsors, all Democrats. It would establish something called the National Freight Mobility Infrastructure Fund, to be used at the Secretary of Transportation’s discretion for grants to states and other entities aimed at improving the infrastructure of surface transportation in the U.S.

Under this bill, the fund would be supported by a 1 percent tax on freight charges assessed by carriers (not, please, 1 percent of the value of the cargo, as you suggest), payable by either the shipper or the consignee. Just how this tax would be assessed and collected is unspecified in the draft legislation, and I imagine the actual process would be something of a nightmare. But I’m sure that the workings of bureaucracy would somehow impose the burden on carriers in the same way vendors collect state sales taxes.

This isn’t the first time this proposal has wended its way through the halls of Congress. The same legislative proposal cropped up in the previous Congress, although it got nowhere. And, in fact, that’s very likely to be its fate again.

A great many pieces of proposed legislation get introduced in each session of Congress, most of which simply find their way onto the resumes of the congressmen who introduce them come election time. As a matter of fact, that’s mostly their function. I mean, we can’t let it be said that our elected representatives in Washington are simply doing nothing now, can we? So even when legislation stands no realistic chance of passage, it still gets put out there with lots of publicity.

Like most such bills, this one has been referred to committee, where it will almost certainly sit and wait endlessly and hopelessly for action until it dies a natural death. There is virtually no real chance it will receive a hearing, much less a vote.

For what it’s worth, small trucking interests have gone on record as opposing the bill. Their argument is that some portion of the infrastructure fund is meant for railroads, which are private enterprises and hence should not have access to public funding for improvements. I suppose there is some merit to that argument, notwithstanding that the tax also would apply to railroad freight charges as well as those of motor carriers.

But nobody in any sector of the industry wants this sort of tax — neither the shippers/consignees who would have to pay it, nor the carriers who would be stuck with collecting and remitting it. Nor would it be popular among the bureaucrats who would have to administer and enforce it. Washington does love to take your money; what it doesn’t really enjoy are the difficulties of extracting it from you.

In addition, the proposed infrastructure fund would run crosswise with the congressional desire to shrink government bureaucracy. A separate fund would require separate administration and wouldn’t fit in well with current government programs to pay for roads and other such infrastructure improvements.

There’s also the matter of bus passengers in private car operators who would get a free ride on the roads, bridges and tunnels paid for by those freight tax collections. The inequity of the tax, as opposed to tolls and other such user fees, isn’t likely to pass muster with congress-people who have to face up to their contributors, as well as to voters, come election time.

In any case, I wouldn’t worry much about this legislation coming close to being law in the foreseeable future. In politically divided Washington, our lawmakers have enough trouble agreeing on the time of day, much less on any legislation that’s going to garner even the least bit of resistance. 

Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, 843-559-1277; e-mail, Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010.

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