Michael Evans, a former Senate Finance Committee
aide and current K&L partner, predicted “very significant changes” in tax policies, since Obama disagreed
with Bush’s tax cuts and because the 2010 expiration of
the 2001 and 2003 cuts will force action.
Although Obama has focused much of his discussion of tax changes on cuts for middle-class taxpayers,
he also suggested some business tax provisions that
could stimulate the economy.
Perhaps the biggest tax issue for the maritime industry is deferred taxation on overseas earnings, Evans said.
During last year’s political campaigns, Obama and
some Democratic lawmakers argued for changes in tax
rules that are perceived as encouraging transfer of U.S.
jobs overseas. Debate is expected early in the new
Congress on how to translate that concern into policy.
Under current tax codes, some U.S. shippers’ earnings have been “trapped” overseas for years to avoid
FEDERAL PROGRAMS BENEFIT MARITIME INDUSTRY
The American maritime industry, and the closely
associated shipbuilding and ship-repair activities,
benefit directly from a variety of federal programs
and funding sources, including the Departments of
Defense, Homeland Security and Transportation.
And the shippers, shipyards and their suppliers
provide approximately 500,000 jobs, pump tens
of billions of dollars into the national economy and
contribute directly to national security.
One of the key programs the industry counts on
is the Jones Act, which requires that all waterborne cargo being transported from one U.S. port
to another be carried in ships that are American
built, registered, owned and crewed.
According to the U.S. Maritime Administration
(MARAD), the Jones Act fleet includes more than
38,000 vessels, the vast majority of which are barges and tugs operating on the inland waterways. Operating that fleet provides about 64,000 jobs, and the
shipyards and associated services needed to maintain that fleet generates more than 150,000 jobs.
Other federal programs supporting the maritime
■ The Cargo Preference rules, which are intended to promote the use of U.S.-flag vessels in the
international movement of cargo when that movement is a direct result of federal government
action, financial sponsorship or in connection with
a government guarantee. The rules apply to 100
percent of military cargo, 75 percent of agricultural products and lesser amounts of other items.
■ The Maritime Security Program, which provides
operating subsidies to a limited number of American-owned and -operated vessels to ensure the availability of commercial sealift and intermodal transport to
sustain U.S. military operations overseas. It currently covers 60 ships. Those ships supported the
buildup and sustainment of forces for the two wars
with Iraq and more recently helped to rush Mine
Resistant Ambush Protected vehicles to Iraq to protect American troops from roadside explosives.
■ Title XI, which provides government-backed
loans to construct, rebuild or rehabilitate U.S.-flag
vessels, or eligible export vessels, in U.S. shipyards. It also can help domestic yards fund
advanced shipbuilding technology or facilities.
■ The Capital Construction Fund, a government-run savings program to help owners and operators of U.S.-flag vessels get money to modernize
or expand through deferral of federal taxes on
money deposited in the fund. It is intended to
encourage construction, reconstruction or acquisition of vessels built in U.S. yards and documented for foreign trade, Great Lakes’ or short-sea
shipping or fishing. It was designed to counter the
advantage of foreign-flag ships that do not pay
taxes on shipping income, MARAD said.
Although the United States once had the largest
commercial fleet in the world, it currently ranks
12th in the number of ships in international trade.
The once-vibrant U.S. shipbuilding industry also
has shrunk, and the remaining shipyards are sustained mainly by Navy and Coast Guard construction and repairs, and by vessels required for
Jones Act shipping or offshore oil and natural gas
exploration and production.
But nearly 100 shipbuilding and repair firms generate about $15 billion in annual income. ■
— OTTO KREISHER, Special Correspondent