Legislative Update: Plastics Taxes & Circular Economies

Virgin Resin Tax

Congressional efforts to pass a 20-cent per pound tax on virgin plastic resin continue to threaten the vinyl and plastics-related industries throughout the supply chain and eventually deliver a hard blow to American consumers. The tax proposal, introduced by Sen. Sheldon Whitehouse (D-RI), is being considered by the Senate Finance Committee as a possible pay-for in the Senate reconciliation package.

On Sept. 27, Rep. Tom Suozzi (D-NY) introduced similar legislation that would also tax virgin plastic in single-use products at 20 cents per pound. Suozzi is advocating for his legislation to be included in the House version of the reconciliation bill. During the Vinyl Industry Congressional Fly-in on Sept. 28, industry leaders explained to members of congress and their staffs why this was bill should not be considered in the reconciliation bill. Reasons include but are not limited to the fact that the bill has not had a single congressional hearing and remains unexamined in terms of actual environmental and economic impacts. It is also a regressive tax and has unintended consequences like incentivizing alternative products with a higher embodied carbon and encouraging consumers to purchase finished plastic goods from China – where there is no governmental oversight body like the Environmental Protection Agency or Occupational Safety & Health Administration.

On Sept. 13, many plastics producers wrote a letter to the House and Senate leadership, sharing their concerns that the plastic excise tax would harm U.S. competitiveness and become a discriminatory and regressive tax that would shift a $120 billion tax burden on consumers, “especially lower-income families who can least afford the higher price on essential products.” Of course, this violates the President’s pledge not to raise taxes on Americans making less than $400,000. The companies pointed out that the tax is on resin that is often not used to manufacture “single-use” products. This also would bypass the requirement that the revenue raised would be dedicated to funding the efforts to eliminate plastic waste, possibly investing it in unrelated items or activities. Furthermore, the plastic excise tax would undermine efforts to address climate change by incentivizing alternative materials, some of which may release higher lifecycle greenhouse gas emissions and encourage plastic manufacturers to shift jobs to China. The organizations are urging lawmakers to adopt the “5 Actions for Sustainable Change,”  a more effective alternative set of policies that the Vinyl Institute (VI) and the plastics industry have proposed to accelerate a circular economy for plastics.

The VI also joined more than 20 organizations representing manufacturers and users of plastic products in a Sept. 27 letter to House and Senate Leadership reiterating many of the above points.  We are asking lawmakers to refrain from including the tax in further discussion related to the budget reconciliation due to the many unanswered questions regarding the bill’s effectiveness in achieving its goals and the widespread repercussions that are not being addressed through the legislative process.

“Our respective industry commitments to sustainability include goals of using less material and working to reduce our overall environmental footprints,” the letter says. “We stand ready to continue conversations with Congress to advance these goals, but don’t believe a tax of this sort moving through the process in this manner is the right approach.” Since the legislation has not been fully vetted, the tax has not undergone congressional hearings, received expert analysis, or been debated on both sides. There has been no opportunity to perform an economic impact study on a tax of its size or discussions on how it would viably be applied. “Early analysis paints a bleak picture: one industry estimate concludes the resin tax will place 92,000 American jobs at risk and increase the cost of plastic resin by up to 26%. On top of the direct impact on the cost of resin, the complexities of implementing such a tax would place an enormous burden and cost on manufacturers and users of plastic products trying to comply.”

Government Funding and Biden Agenda

The path passing President Biden’s major legislative Build Back Better agenda, which includes infrastructure and the reconciliation bill, remains uncertain as infighting among Democrats continues to plague the Democratic leadership. House Speaker Nancy Pelosi (D-CA) emerged from a Sept. 27 House Democratic Caucus meeting to announce that tying the infrastructure and reconciliation bills is no longer tenable. The reconciliation bill will most likely have to be trimmed to accommodate moderate Democrats. This past week, President Joe Biden personally jumped into the negotiations and Senate Majority Leader Chuck Schumer (D-NY) began to negotiate with Sens. Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) to achieve that topline.

Pelosi so far says she will proceed with voting on the President’s infrastructure bill (IIJA) on Thursday, Sept. 30, while she waits to hear more from Senate Democrats. Moving forward with the infrastructure bill has its own risks as progressive Democrats dig their heels in deep, pledging to oppose the bill without passing the reconciliation bill first.  Pelosi only has a three-vote majority, making the task even more difficult but hopes that she can turn progressives around in trusting that she will be able to deliver an agreement from the Senate that the party as a whole can agree to, but that is looking less likely as Sens. Manchin and Sinema continue to stall in providing the Speaker with what she needs.  Pelosi is known for refusing to put legislation on the House floor that she knows will not pass, so it is still in question whether or not she will pull the bill as Democrats continue to work on a solution.

Meanwhile, one vote that is guaranteed to happen today is a Senate vote on a bipartisan stopgap funding measure that would avoid the possibility of a partial government shutdown as the new fiscal year begins on Oct. 1. Democrats were forced to drop a provision that would suspend the debt ceiling until after the midterm elections to gain Republican support and pass the 60-vote threshold.   The House is expected to pass the amended continuing resolution (H.R. 5305) soon after the Senate acts.

Circular Economies

The Senate Environment and Public Works (EPW) Committee held a hearing on Sept. 22 on the importance of promoting a circular economy.  The hearing, entitled “The Circular Economy as a Concept for Creating a More Sustainable Future,” follows a series of roundtable discussions that the bipartisan Senators have been holding with stakeholders on the subject in hopes of increasing recycling, reuse, and reducing materials. EPW Chairman Tom Carper (D-DE) acknowledged that the roundtable discussions have been “sobering” but also “encouraging.” The senators asked industry, state, and environmental representatives to outline challenges and possible legislative solutions to barriers to recycling, reducing and reusing materials from products, while mentioning ongoing issues such as contaminated recycling streams, the need for improved infrastructure, and the impacts of China restricting imports of recycled materials, particularly plastics. Notably, the hearing did not include any plastic industry witnesses. Ranking Member Shelley Moore Capito (R-WV) acknowledged the amount of bipartisan work that has been done, such as both versions of the Save our Seas Act and significant funding for recycling in the reconciliation bill, but questioned what lessons could be learned from the paper industry when comparing their 65% recycling rate to the 13% plastics recycling rate. A comparison that came up numerous times in the hearing.

There was a significant divide between Democrats and Republicans on how to approach the next steps. Democrats have suggested using regulations and mandates, but Sen. Capito pushed back, arguing that those avenues would not “create effective, long-term markets.” “Falsely inflating the market for recycled goods with federal dollars does not help either,” Capito said. “It simply prolongs the unviability of the sector, which could end up right back where we are today when the funding is gone.” She suggested creating new innovative markets and technologies to address the low demand for recycled materials. Sen. Whitehouse predictably seized the moment to criticize the recycling rates and plastics. He and World Wildlife Fund Policy & Government Affairs Director Roberta Elias supported extending producer responsibility (EPR) programs such as those in the “Break Free From Plastic Pollution Act.”

Chairman Carper asked each witness what their top recommended legislative approaches to move closer to a more circular economy. Like the members, the panelists were divided. Elias said they would like to see “real” policy signals to reduce unnecessary and problematic materials and conservations on EPR, including a national bottle bill and supported the virgin plastics tax. Elizabeth Biser, secretary of the North Carolina Department of Environmental Quality, backed investments to states on infrastructure and education on the issue. She also pushed for grants and technical assistance to help grow state programs. Brian Hawkinson, executive director for recovered fiber at the American Forest & Paper Association, asked lawmakers to support the Recycling Enhancements to Collection and Yield through Consumer Learning and Education (RECYCLE) Act and opposed the government interfering with supply chains for paper manufacturing, adding that EPR is for hard-to-recycle items such as mattresses. Billy Johnson, a lobbyist for the Institute of Scrap Recycling Industries, agreed with Hawkinson but also called for policies to encourage market development and to encourage, but not mandate, recycled content in products.