The Many Hazards of a Mega-Superfund

440 June 10, 1985 THE MANY HAZARDS OF A MEGA-SUPERFUND INTRODUCTION Responding to the outcry following hazardous waste leakages at New Yorkls Love Canal and other locations, Congress enacted in 1980 the Comprehensive Environmental Response, Compensation, and Liability Act, commonly referred to as the llSuperfund.ll Its aim is to clean up hazardous waste. Originally authorized to spend expire on September 30 of this year. While the program is sup posed to deal only with so-called orphan waste dumps--those for which the responsible party either is unknown or no longer exists continuing pressure from environmental groups has expanded the Superfund concept vastly waste disposal facilities.

Although it may be appropriate for the federal government to help clean orphan sites, the pending reauthorization legislation would extend fe deral responsibilities to currently operating facilities at which no waste problem has been identified.* This would be a serious mistake because it would add enormous new costs to the program. To make matters worse, advocates'of a mega-Superfund would def i ne the term "hazardous wastes" so broadly that virtually any substance disposed of by a company could be included. This dramatically departs from the limited role that Superfund originally was intended to fulfill and should not be part of its reauthorizat i on some $1.6 billion over a five-year period, Superfund is set to It now includes virtually all hazardous For additional background, see Milton R. Copulos Superfund Extension: HOW Much is Enough Heritage Foundation Backgrounder No. 420, March 3, 1985. 2 U n der one version of the reauthorization bill, this enlarged scope for Superfund would increase the $1.6 billion expended under the program during the last five.years to as much as $13.5 billion during the next five years. To finance this expansion the Sena t e Finance Committee recently proposed a new excise tax of 0.08 percent on the gross receipts of all manufacturing com panies with gross sales exceeding 5 million. Not only is the imposition of this hidden federal tax an abrogation of the prin ciple that t he party responsible for the waste should also be responsible for its safe disposal, but it also marks the creation of a new, highly regressive, inflationary, and inequitable tax levy with enormous potential for abuse.

FINANCING SUPERFUND The current Superfund program is financed primarily through a special tax levied on the oil and petrochemical industries.

This tax raises about $300 million each year. In addition approximately 10 percent of the total Superfund collections 44 million annually) comes from general Treasury revenues. This financing mechanism is flawed in several important respects.

First, the bulk of the funds.comes from a relatively narrow sector of American industry, which is not responsible for creat ing most of the nation's hazardous was tes. The chemical industry moreover, has been among those leading the effort to reduce hazardous waste generation. Ironically, therefore, the greatest burden for cleaning abandoned hazardous waste disposal sites has been placed on the industry least culpa b le for their existence A second flaw of the current tax structure is that it is in large part a product of Congress's search for a "deep pocket" to pay for the program It was widely assumed in the late 1970s and early 1980s that the oil and chemical indus t ries long would continue to enjoy record profits. But this has not happened due to the cyclical nature of and the rapidly changing circumstances within the oil and chemical industries. Congress thus is sub jecting these companies to a special tax at a tim e when they face increasing competitive pressure and low profit margins. This could prompt these firms to move their chemical production over seas, jeopardizing American jobs. Taxing only the oil and chemical industries, meanwhile, creates little incentive to reduce their waste production among those firms in other indus tries that actually generate the bulk of hazardous wastes.

To address this problem, the Reagan Administration proposes a "waste end tax," which would impose a levy on waste actually deposit ed in dumps. This is clearly fairer than the present system. Yet a waste end tax is not problem free. For one thing it could spur the use of illegal dumpsites and thus make the situation far more dangerous. For another thing, a waste end tax would be extr e mely difficult to administer;for it would have to consider such factors as the relative toxicity of various sub stances and their volume. Finally, it would not address the 3 question of relative safety of different disposal methods, and it therefore would create an incentive to use the cheapest disposal method irrespective of its long-term safety I THE SENATE FINANCE COMMITTEE PROPOSAL While the current financing system and the Administration's i waste end proposal have problems, they are at least free of t he potential dangers and injustices in a recent Senate Finance Committee proposal. This panel recommends an excise tax of 0.08 percent on the gross receipts of all manufacturing companies with I sales in excess of $5 million. This is a disastrously flawed way to solve the Superfund financing problem. The reasons I dicts promises by the Administration and the leadership in Congress not to increase taxes this year 1) A new levy, regardless of the purpose, directly contra 2) The potential for raising revenue b y such a tax is enormous. Even the 0.08 percent proposed under the Superfund reauthorization measure would collect an estimated $1.2 billion annually. This merely would whet the appetite of a revenue hungry Congress, which would see this indirect tax, wel l -hidden from the consumer, as a money machine that could yield 15 bil lion for each percentage point increase in rates 3) An excise tax is among the most regressive levies a government can impose. Although raw agricultural products and service industries w ould be exempt, every manufactured item would be affected. The result: those Americans with the lowest incomes would feel the greatest relative pinch. Unlike income taxes which contain some progressivity, excise taxes are inherently regressive, and nothin g can be done to make them otherwise 4) In addition to the excise tax's direct cost, the paper work burden would be immense. A new bureaucracy would have to be created to collect the tax i DOES SUPERFUND NEED TO EXPAND?

The pressing question is why a speci al tax is required at all. If, as its advocates contend, the Superfund addresses a national crisis, and the parties responsible for the problem cannot be located and forced to pay for the cleanup costs, then the most appropriate source of funding is gener al Treasury revenues.

This would be in keeping with the rationale for creating Superfund.

The sites that generated public concern were limited in number and contained hazardous wastes that came from many different places. But hazardous wastes are generate d by every sector of the economy, including homeowners who dispose of empty bottles containing garden sprays or pesticides. The problem therefore is not solely attributable to one industry or even industry in general. Leakages from the dumpsites, moreover , can affect very 4 large areas if left untreated and therefore can endanger large population segments. Finally, cleaning hazardous waste sites often may exceed the technical or financial capabilities of the community or state in which they are found.

Sinc e the number of sites in this category is limited, the amount of general Treasury funds to expend on the program is also limited. There would seem to be little justification, therefore for a program originally estimated to cost $1.6 billion to have evolve d into one with a potential price tag of $13.5 billion.

What is happening is that lobby groups are trying to take a small program, in which federal funding is legitimate, and turn it into a multibillion dollar federal activity. For good reason the. original Superfund concept had broad popular support. Clean ing up orphan hazardous waste disposal sites involved fewer than 2,000 locations around the country. The program is still identi fied in the public mind with this legitimate and discrete goal.

The public surely did not envision extending Superfund's scope to cover, as it would under some versions of the reauthorization bill, gasoline filling stations and local dry cleaning plants.

Not only are these facilities where those responsible for hazardous waste disposal can be readily identified, but classifying them as hazardous waste sites is a gross exaggeration. These and similar businesses, moreover, already are striving to sol ve their waste disposal, problems on their own. There is no pressing need for federal intervention or funding in these sectors.

RECOMMENDATIONS Congress should look hard at.Superfund and determine what is needed to solve the orphan site problem. Once legi slators have done so, it will be possible to reconstitute the program in a way that is faithful to its original purpose of helping clean up abandoned hazardous waste sites. Only after carefully defining the scope of Superfund should Congress look at finan cing mechanisms.

Clearly the current funding scheme, which assesses only 15 companies some 56 percent of the tax, is unfair. Similarly unac ceptable ought to be other financing proposals, such as an excise tax, which creates a permanent new tax and contrad icts the wel come proposals for a simpler and fairer tax code. To the extent that the clean-up of the limited number of orphan sites is a national problem, and to the extent that Superfund's responsibil ity mirrors the original intent and scope of the law , Superfund should be financed from general revenues.

Milton R. Copulos Senior Policy Analyst