Congress is considering reviving taxes on the chemical and petroleum industries to pay for cleanup of polluted sites.
The taxes are meant to shift at least some of the cleanup costs from general taxpayers to the polluting industries, though industry leaders fear the taxes will make them less competitive internationally.
“They’re pretty much doubling the tax from what it was the last time,” says Greg Bowser, president and CEO of the Louisiana Chemical Association.
The federal government imposed a “superfund tax” on the chemical and oil industries in 1980 and added a tax on certain hazardous substances in 1987, but all were allowed to expire in 1995, according to a summary by KPMG, a global audit, tax and advisory company. Proposals in the Bipartisan Infrastructure Funding Bill and the Build Back Better Act reconciliation bill would revive the taxes, KPMG says.
The Petroleum Superfund Tax would be set at 16.4 cents per barrel—double the prior rate—and would be indexed to inflation beginning in 2023. The Chemicals Superfund Tax and the Hazardous Substances Tax rates would vary from $0.44 to $9.74 per ton.
When using the core inflation measurement, $1 in 1995 is equivalent in buying power to $1.80 in 2021, a difference of about 80% on average, according to an inflation calculator.
“If the current proposals were enacted, companies in the petroleum and chemicals industries generally would have to compute and pay Superfund excise taxes on crude oil and petroleum products, certain chemicals, and imported hazardous substances,” KPMG says. “This additional excise tax compliance would affect multiple stakeholders in each company, from procurement to tax, environmental regulatory to IT, and leadership to customer relations.”
Crucially, the tax is paid per unit and not tied to the value of the product like (for example) oil severance taxes, says economist Loren Scott.
“It doesn’t matter what is happening to the price of the product,” Scott says. “The price of the product could be so low that you’re actually losing money, but you still have to pay the tax.”