Taxes on the movement of cargo

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    Taxes on the movement of cargo

    Port of Tacoma position

    The Port opposes

    increases in taxes on

    the movement of cargo,

    which would increase

    the cost of calling on

    Washington state ports

    and may result in the

    diversion of cargo and

    jobs to other states.

    Contact:

    Sean EaganGovernment Affairs [email protected](253) 428-8663

    (Printed April 11, 2103)

    Background

    The House Democratic budget proposal released on April 10 includes two new taxes oninternational trade: a 550% increase in the B&O tax on stevedoring services; and a new 1.926% tax on gross revenue associated with interstate cargo passing through

    Washington state.

    Washington state cargo is discretionary

    70% of cargo passing through the Port of Tacoma is bound for destinations outside of Washingtonstate. It does not have to pass through Washington state to get to its destination. Shippers couldeasily divert the cargo to ports in Canada, California, or the Gulf Coast if costs become too high.

    Washington exporters rely on imports to provide a cheap supply of empty containers to carry theirgoods during the backhaul to foreign markets. Increasing taxes on trade may divert discretionaimport cargo away from the state, depriving Washington exporters access to empty containers.

    Price matters

    "The competitiveness of our ports is determined by two basic factors: the direct costs to shippersand their customers, and the speed and convenience that it takes to get goods from our ports totheir ultimate destination, explains the Washington Council on International Trade (WCIT) in theirrecently released International Competitiveness Strategy.

    Recognizing the negative impacts taxes have on trade, the Legislature in 2012 confirmed thestate's longstanding commitment to existing tax policy when it passed Leasehold Excise Tax (LETlegislation. The two new proposals to tax trade would similarly impact the direct costs to oceancarriers as the LET increase the Legislature proactively prevented from occurring last year.

    Studies confirm price sensitivity

    The Legislatures Joint Transportation Committee found that a tax as low as $30/TEU (twenty-fooequivalent unit container), or 1.5 percent per cost of moving a container, could divert as much as30% of Washington cargo out of state. According to one report author, Puget Sound ports havesignificant competition and imposition of a fee could lead to a significant loss of containertrafficDecision makers should proceed with care.

    The Federal Maritime Commission (FMC) has also validated this correlation between cargo taxesand cargo diversion. In 2012, the FMC found that approximately half of U.S.-bound cargo passesthrough Canadian ports primarily because of the cost impacts associated with the federal HarborMaintenance Tax.

    The Joint Legislative Audit and Review Committee (JLARC) also acknowledged the price sensitivof cargo taxes. In voting to accept the 2012 Tax Preference Performance Reviews Report, JLARon February 20, 2013, expressed disagreement with a Citizens Commission on Tax Preferencerecommendation to increase the stevedoring tax.

    Lost cargo = lost jobs

    According to WCIT, 40% of jobs in Washington are connected to international trade. "The ports oWashington are key enablers for our state's trade economy." The loss of discretionary cargo woumean a loss of family-wage jobs-- not just longshore, but also railroad workers, truck drivers,distribution center employees, tug operators and more. For example, a 30% loss in cargo wouldresult in an estimated loss of 9,416 jobs in Washington and $58.4 million in state and local taxrevenue per year.

    mailto:[email protected]:[email protected]

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