Taxing The Innocent: Superfund’s Back

As the Senate debates the energy bill, Democrats are calling for reinstating the federal tax on petroleum and chemical industries under the Superfund law. Sen. Robert Toricelli (D., NJ) is expected to offer an amendment to the energy bill or another legislative vehicle soon. His amendment would add a 9.7-cent-per-barrel tax on petroleum as well as other taxes on various chemicals and a corporate environmental income tax.<?xml:namespace prefix = o ns = “urn:schemas-microsoft-com:office:office” />

Advocates claim that the Superfund tax is a moral imperative because they say it's based on the “polluter pays principle.” This tax is really a perversion of the polluter pays principle and simply promises to raise energy prices at a time when consumers are already suffering enough.

A correct understanding of the principle holds that if you cause environmental damage, you should pay to correct the harm. In a market system, that means compensating the party whose property you damaged. The principle promotes good behavior by holding individual parties responsible for their actions.

The Superfund tax was created as part of the nation's law to clean up contaminated property. The monies collected were designed for a special fund, euphemistically called “the Superfund.” The Environmental Protection Agency (EPA) was then to use this money to clean up waste sites. The tax for this fund expired in 1995, but the fund is only now beginning to run low.

Unlike the polluter pays principle, this tax rests on a different principle, which could be called “tax the innocent principle.” This principle allows the government to take money out of the pockets of innocent parties to line the pockets of regulators. Under the “tax the innocent principle,” chemical and petroleum businesses are punished for the “sin” of being part of industries that environmentalists don't like. It has nothing to do with their individual actions.

The law also gives the agency authority to reach into the pockets of other innocent parties. After the EPA uses the tax funds to clean up a site, then it sues parties to recover the costs. It can also sue parties before cleaning a site, forcing them to pay for cleanup. EPA then puts its “winnings” in the federal Superfund pocket, which it can dig into for more lawsuits against innocent parties.

Superfund advocates insist that this part of the program holds liable parties that are directly responsible for contamination. But that would mean too few pockets. Instead the EPA applies another Superfund principle that could be called the “everyone is guilty principle.” That is, everyone remotely connected to a contaminated site is liable for 100 percent of clean-up costs — which often run in the multimillion-dollar range.

Did you legally transport waste to a site 50 years before that property became contaminated? You are guilty. Legally arrange to have waste delivered to a site? Guilty. Did you inherit land from your grandmother that the EPA discovered was contaminated 50 years ago? You are guilty again. It doesn't matter if another party contaminated the site. You are liable under all these situations.

One of the few legal escape clauses in the law requires you to show that contamination was an “act of God.” But the EPA and the courts practically never accept that defense. Apparently, they don't like to blame the Almighty. Perhaps that's because He never pays into the Superfund.

The EPA has held God's agents (churches and their officials) liable, as well as homeowners, hundreds of schools (simply for producing trash), local governments, small businesses, and everyone they could link to a site.

Egregious examples of Superfund victims have led lawmakers and others to call for Superfund reform. Some anti-tax lawmakers in Congress refuse to reinstate the tax without such reform. But Congress should never restore the tax. It should let the fund die a natural death and repeal the cleanup and liability programs because Superfund has proven a failure. EPA has spent billions to clean scant few sites and the agency clean-up standards are so ridiculously stringent that the costs of cleanup are astronomical.

Adding insult to injury, while often depicted as cancer hot spots, there is little evidence that Superfund sites pose any significant health risks. In a study on the topic, a National Research Council report noted the problem: “Based on its review of the literature on the subject [whether Superfund sites pose any health risk], the committee finds that the question cannot be answered.”

Common sense tells us that to be culpable you have to actually commit the sin. Being in the business of providing energy and chemical products to consumers who demand them doesn't fit the profile. But the laws of right and wrong don't apply to Superfund. If regulators thought they could collect, they'd probably even try to sue God.