MORE TAXES FOR MORE GOVERNMENT WASTE WATER GRANTS?

In August, a bill was introduced in the U.S. House of Representatives proposing "The Water Protection and Reinvestment Act of 2012." The apparent purpose of this proposed legislation is to enable the federal government to give more grants and loans to local governments to meet more federal mandates to upgrade waste water disposal facilities. Interestingly, the sponsor indicates that too much of the costs to meet federal regulations are being borne by local governments and ratepayers, so "new sources of revenue" are needed to enable the federal government to fund local waste water infrastructure requirements.

The "new sources of revenue" proposed are federal taxes on the sale by manufacturers, producers and importers of containers of water-based beverages, water disposal products and pharmaceutical products. A water-based beverage is defined as a container of water or of any mixture that is at least 50% water. There are some exceptions, including for alcoholic beverages. Water disposal products are defined to include soaps, detergents, toiletries, toilet tissue, water softeners and cooking oils. While the tax purports to be on manufacturers, producers and importers, no doubt the tax burden would be passed on in the ultimate cost of the product to consumers.

Other features of the bill is a mandate that states develop "affordability" criteria to use in identifying municipalities that cannot afford to upgrade facilities to meet federal mandates. It also provides for establishment of "best industry practices" for publicly owned waste water systems and for cost of service studies.

Recently, some have proclaimed that all Americans belong to the government. Perhaps, this proposed legislation can be viewed as creating further dependency on government. The paradox may be that the need for"new sources of revenue" is being created at least in substantial part by increased governmental regulations. And, while it is said that in certain situations consumers may not be able to afford needed system upgrades, the source of federal funding under this legislation is more taxes likely to be borne by all consumers. So, what has happened to the rate making principle that costs to serve ratepayers should be assigned to and paid for by the ratepayers who benefit from that service? Is the assumption of "affordability" consistent with the principle that ratepayers should pay for their costs of service?