Journal editorial claims Superfund tax targets businesses “with over $2 million in revenue”

From a July 8 Wall Street Journal editorial:

EPA Administrator Lisa Jackson has taken the highly unusual step of lobbying Congress to reinstate the Superfund tax that was imposed after a previous environmental disaster. The fund emerged in 1980 from the backwash of the Love Canal as the EPA's pot of cash for decontaminating toxic waste sites. Ms. Jackson wants Congress to renew certain corporate taxes that lapsed in 1995, to the tune of about $19 billion over 10 years.

The Superfund tax targets oil, gas and chemical companies, but also any business with over $2 million in revenue, and it was never an Administration priority until the spill. Oregon Democrat Earl Blumenauer has a Superfund bill that will probably be folded into whatever spill response Congress passes later this summer.

In fact, the tax affects profits that exceed $2 million

“Superfund” taxes previously supported “cleanup trust fund” for hazardous waste sites. As The Washington Post reported, the Superfund program was “first established 30 years ago to clean up sites around the country contaminated with hazardous waste.” The fund has been “facing a budget crunch,” in part because the taxes imposed ''on oil and chemical companies and certain other corporations" to support the “cleanup trust fund” expired in 1995. The Superfund program has been funded by general revenues in recent years, but this “has slowed the rate of cleanup,” according to the Post. In 2009, President Obama's budget proposed reinstating the Superfund taxes, and this year the administration is again seeking to do so.

Proposal includes tax on “the amount of a corporation's modified alternative minimum taxable income that exceeds $2 million.” Legislation proposed by Rep. Earl Blumenauer (D-OR) would reinstate Superfund taxes including “a corporate income tax of 0.12 percent on the amount of a corporation's modified alternative minimum taxable income that exceeds $2 million”:

Before 1995, the Superfund was financed by excise taxes of 9.7 cents per barrel on crude oil or refined oil products, excise taxes of $0.22 to $4.87 per ton on certain chemicals, and a corporate income tax of 0.12 percent on the amount of a corporation's modified alternative minimum taxable income that exceeds $2 million.

The Superfund Reinvestment Act would reinstate the Superfund taxes on polluters to their previous levels. The revenue garnered from these taxes would be about $1.7 billion per year and $18.9 billion over 10 years

Tax applied to corporations' “taxable profits,” not “revenue,” as the Journal claimed. As Dr. Eric Toder of the Tax Policy Center explained via email, the amount a corporation would pay for the Superfund tax is calculated from a “measure of a corporation's taxable profits ... less a $2 million exemption”:

Revenue is the gross sales receipts of the corporations.

Taxable income is based on profits, which is receipts less costs. Cost includes wages, cost of goods sold (what is paid for inventory that has been sold), depreciation and interest. The corporate income tax is calculated by multiplying the corporate tax rate by taxable income.

In 1986, Congress enacted a corporate alternative minimum tax (AMT). Under the AMT, corporate profits tax liability is equal to the product of a lower tax rate and a broader measure of taxable income (alternative minimum taxable income or AMTI). AMTI is calculated by adding back certain items of tax preference to taxable income.

So effectively the superfund tax is calculated by multiplying the superfund tax rate by a somewhat broader measure of a corporation's taxable profits than is used for calculate the corporate income tax, less a $2 million exemption.

Wall Street Journal claim echoes Inhofe. In a June 22 hearing of the Senate Committee on Environment and Public Works, Sen. James Inhofe (R-OK) stated that businesses “with over $2 million in revenue” would have to pay the tax. Later in the hearing, Inhofe was corrected by Sen. Frank Lautenberg (D-NJ):

SEN. INHOFE: [M]any forget how broadly the Superfund tax applies. If you own a business with over 2 million in revenue, regardless of what you manufacture you would pay the tax. In other words, the Superfund tax is also a small business tax affecting thousands of such businesses across the country and their employees.

[...]

SEN. LAUTENBERG: Thanks. Just one correction, if I might, to my friend from Oklahoma, and that is that it wasn't $2 million worth of revenue, it was $2 million worth of taxable income so that the revenue had to be substantially higher than that before a tax was imposed. (accessed via Nexis)