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Clean Water Advocacy - Newsroom - AMSA in the News

Taxes on Pollution, Income Seen as Sources
For Infrastructure Trust Fund, Paper Says

Small increases in personal or real estate taxes, new excise taxes on water-based recreational activities, or pollution taxes on certain industrial dischargers are possible sources of revenue for a federal wastewater infrastructure trust fund, according to a white paper made available by wastewater treatment officials Aug. 15.
The paper, A National Clean Water Trust Fund: Principles for Efficient and Effective Design, was released by the Association of Metropolitan Sewerage Agencies, which supports the establishment of a federal trust fund to help pay for wastewater infrastructure.

The white paper is being circulated among staff at EPA, Congress, and among AMSA members.

AMSA, the Environmental Protection Agency, and the Congressional Budget Office estimate a funding gap of $7 billion to $11 billion annually to cover the cost of repairing and maintaining aging infrastructure and expanding systems to accommodate population growth.

To date, wastewater infrastructure has been paid for generally through the now-defunct construction grants program set up under the 1972 Clean Water Act, the current state revolving loan fund financed at about $1.35 billion annually through EPA's budget, and locally assessed fees.

The SRF revolves at about $2 billion annually and is constantly being replenished as the loans are repaid. However, wastewater treatment officials and their supporters have argued that the federal government needs to do more, especially as some of these systems age and need to be replaced.


Other Trust Funds Examined

The AMSA white paper looks at other trust funds, such as those set up to build the national interstate highway system, clean up contaminated waste sites, and support aviation as models for a possible wastewater fund. National trust funds support infrastructure critical to the domestic economy, among other things, the paper said.
"Given the importance of national infrastructure networks, the sheer size of the investment alone provides a sound rationale for federal involvement," the paper said. "While the average annual funding requirement may appear daunting at the local or state level, funding requirements can appear small in comparison to the total federal budget."

Five specific areas were listed as possible funding sources for a wastewater infrastructure trust fund:


Polluter pays--industries, households, commercial establishments, transportation, resource extraction, agriculture, or land development/disturbance are levied a pollution tax in relation to their contribution to degradation of quality in the water column, degradation of sediments, or destruction of aquatic habitat.
Beneficiary Pays--categories of clean water beneficiaries, such as public drinking water systems, developers, the tour and recreation industry, the fishing industry, and food producers pay some sort of benefits fee in relationship to their use or enjoyment of clean water.

The Nation as a Whole Pays--some broad-based fee or tax that spreads the cost of water quality improvement among all users with the idea that water quality is a public good, the benefits of which are broadly available to all people.

Specific Groups of Users Pay--unrelated to economic principle specifically, but may involve the use of taxes on alcohol or cigarettes or on some criminal behavior.

Volunteers Pay--no particular group of beneficiaries or polluters are forced to pay, but instead, many different groups are encouraged to help pay for wastewater infrastructure, in return for which they earn national recognition.

AMSA Looks to Next Phase

Adam Krantz, director of government and public affairs for AMSA, said the paper only looks at potential sources, not on how they would contribute. The next phase, he said, is to determine the most viable way for potential sources to pay. This involves finding out what the American people and Congress would support, he said.
AMSA commissioned a poll released in May showing that 71 percent of Americans would support a tax increase if that money were dedicated to establishing and preserving water infrastructure (98 DEN A-2, 5/21/03 ).

The white paper said raising the personal income tax rate by about 0.05 percent to finance the trust fund would generate about $15 billion annually. An increase of 0.56 percent in the federal corporate income tax would generate about the same amount.

Krantz said that with the current climate in Congress and the Bush administration, such taxes are probably not likely.

It is unclear whether Congress would support a polluter pays revenue source either, since it has not renewed the tax on petrochemical companies to pay for the superfund trust fund.