Taxing Toilet Paper —Wastewater Finance Savior or Regressive Burden?

Many government-owned wastewater systems in the United States are enterprise funds. That is, they are business-like units within the overall government that should be self-sustaining, taking their revenue from the rates and fees charged to wastewater customers rather than from taxes. Ideally, wastewater utilities base their rates and fees on the full cost of providing wastewater service, not just on operating expenses and routine maintenance costs. Full cost rates and fees would also include taxes and accounting costs, contingencies for emergencies, and, perhaps most importantly, costs related to capital infrastructure—principal and interest on long-term debt and reserves for capital improvement. In general, wastewater systems (and drinking water systems as well) are expected to come up with the money for capital improvements from revenue generated from their ratepayers. There are some subsidized loan programs such as the Clean Water State Revolving Fund, and, for small systems, loans from the USDA Rural Development program. And while there is a chance for some “principal forgiveness” on these loans depending on system characteristics, note that most of the money available to wastewater systems is in the form of debt, not grants. This was not always the case. In the 1970s, after the passage of the Clean Water Act and Safe Drinking Water Act, the federal government created a construction grants program that moved billions of federal dollars to wastewater systems across the country. Everybody loved their “free money,” but of course the money wasn’t free—it came from federal taxes and other federal government revenue. Over time, the burden for paying [...]