Obama budget a 'major blow' to chemicals industry - ACC

15 February 2011 22:50  [Source: ICIS news]

WASHINGTON (ICIS)--The Obama administration’s proposed budget for fiscal year 2012 would strike a major blow against the nation’s chemicals sector by raising taxes, energy and feedstock costs, the American Chemistry Council (ACC) said on Tuesday.

Council president Cal Dooley said that if the budget proposed by President Barack Obama on Monday were approved by Congress, it “would strike a major blow to America’s chemistry industry, making it harder for us to compete internationally, create jobs and continue supplying energy-saving products to the US economy”.

The proposed fiscal year 2012 budget announced by the White House on Monday calls for $3,700bn (€2,738bn) in federal spending, and would include a deficit of more than $1,500bn.

That proposal was already under heavy criticism by Republicans in Congress and among US energy, petrochemical and other manufacturing interests.

Dooley said that the White House budget represented a significant tax increase on US chemicals makers, both in terms of direct tax increases and the loss of tax credits and deductions.

Among other things, the budget would reinstate the Superfund tax on chemicals producers, at a cost of $1.5bn/year.

The Superfund law - the colloquial name for the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) of 1980 - was established to enforce contamination clean-up at waste dumps and other sites.

CERCLA remediation costs were to be borne by those most responsible for the pollution - or by taxpayers in circumstances where direct responsibility could not be established.

As part of CERCLA, a special corporate tax on chemical makers was established to generate additional revenue for the main taxpayer-sourced Superfund, but that so-called Superfund tax was allowed to expire after 15 years at the end of 1995.

The Obama administration tried to get the Superfund tax on chemical makers reinstated last year, but Congress rejected the bid.

Dooley said that the Obama budget proposal also would impose costs on chemical makers by repealing some accounting measures, postponing interest cost deductions and changing rules on foreign tax credits.

In addition, he said, the White House budget would eliminate most tax benefits and deductions now available to US coal, oil and natural gas producers, “which would raise the cost of energy and feedstocks to ACC member companies”.

The US petrochemicals sector and downstream chemical producers are heavily dependent on natural gas as a feedstock and energy fuel.

Dooley said that the budget proposal would thwart the Obama administration’s own goals of strengthening US manufacturing, increasing employment and doubling the nation’s exports.

He warned that the budget, if enacted, would not only erode employment in the chemicals sector, “it could risk jobs in chemistry’s ‘customer’ industries if they move abroad to be closer to raw materials or have to pay more to transport them into the US”.

Although the US president proposes a budget each year for federal government spending and programmes, it is the Congress that actually crafts the budget through a series of hearings, and in private negotiations with the White House.

The 2012 fiscal year begins on 1 October this year, and the federal budget is supposed to be completed before that date.  However, last year, the White House and Congress failed to agree on a budget for the current 2011 fiscal year, which expires 30 September.

Instead, the government has been operating on short-term “continuing resolutions” approved by Congress to provide federal spending authorisations at the level of fiscal year 2010.

($1 = €0.74)

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