User Charges for Port Cost Recovery: the US Harbour Maintenance Tax Controversy

Abstract

The US incurs significant costs in order to maintain its ports and harbours. The harbour maintenance tax, introduced in 1986 under the Reagan-era overall initiative to cut back the average tax burden, has been controversial since its inception. Its imposition on US exports was declared illegal by the Supreme Court. A proposal by the Clinton administration to introduce a harbour services user fee did not gain the support of stakeholders and thus the earlier status quo continues today with the nation's trading partners protesting vehemently. The paper analyses recent US Army Corps of Engineers data on harbour maintenance expenses in the Port of New York and New Jersey and proposes a simple yet realistic user fee model, radically different from any previous proposal, that would comply with the US Supreme Court's constitutionality test while imposing a relatively minor burden on port users. In addition, using the US as an example, the paper contributes to the general discussion on infrastructure pricing and cost recovery through user charges and in this way it addresses, albeit on the fringe, broader public policy issues such as those of mandated taxes and private versus public interest.