15 MB - Great Lakes Maritime Research Institute

Chapter 3: The U.S. Harbor Maintenance Tax, a Bad Idea Whose Time hasPassed?It’s a sunny mid-summer afternoon at South Bass Island on Lake Erie north of Sandusky,Ohio. The harbor on South Bass Island is filled with hundreds of recreational boatersenjoying the beautiful summer weather, touring the island’s historic sites and stopping forlunch and cold beverage at many of the island’s bars and restaurants. If you travel to thesouth end of the island, you might see an ore carrier traveling through the Great Lakes.The ore carrier will not, however, stop at South Bass Island since its shallow water harboris not suitable for deep water commercial vessels.The Edward L. Ryerson leaves Duluth Harbor bound for Cleveland with a cargo of25,000 tons of taconite a few tons below its maximum capacity. In an unusual attempt toutilize this excess capacity, the Ryerson agrees to accept a small container from St. JudeMedical in Minneapolis. The container (which weighs only a few pounds) holds 500 newheart valves bound for the Cleveland Clinic. The Ryerson can handle the extra weight,and its merchant mariners barely noticethe additional cargo. Upon arrival inCleveland, the two cargo items (taconiteand heart valves) are unloaded andforwarded to US Steel and the ClevelandClinic for further processing. Bothproducts are subject to a tax that fewU.S. taxpayers are familiar with, theU.S. Harbor Maintenance Tax or HMT.Here is where the similarity in transportof these two items ends. The HMT is anad valorem (value based) tax, so theFigure 3: Edward L. Ryersonheart valves draw $4,165 in tax while thetaconite draws $1,836 in tax. It’s ananomaly in our tax system that a tax intended to recover the government’s cost of canaland port dredging would impose a lower amount of tax on 25,000 tons of unprocessedsteel raw materials, than it does on a few pounds of heart valves, but that is how the HMTis structured.It’s also an anomaly that the recreational boaters at South Bass Island received $132,310dollars in dredging services in 1999. An amount paid entirely by the HMT, a tax that isnot assessed to them at all, but rather is borne by the ore carrier and all other forms ofcommercial maritime transportation. As shown in the foregoing Great Lakes taxinventory section of this report, the HMT is one of the most significant contributors toGreat Lakes maritime infrastructure. This section of the report will address the problemsnoted above, and explain why the HMT should be abolished.History of the Harbor Maintenance TaxAs shown in the HMT timeline in the previous report section, and as detailed inAppendix C, the U.S. has a long history of taxing products transported onboard ship;29