Wednesday, February 11, 2009

Include Security in Stimulation Plan

An interesting Op-Ed piece showed up in yesterday’s Washington Times. It was written by Daniel B. Prieto, an adjunct senior fellow for counterterrorism and national security at the Council on Foreign Relations. One of his recommendations for the Stimulation Plan was to provide tax incentives to high-risk chemical facilities to improve chemical facility security. Unfortunately, the suggestion was made too late to be included in the plan that was passed today in the Senate. Prieto argued that the use of tax incentives has a well established reputation as a tool for directing the private sector to spend money in a desired way. He notes that this tool has not been used in the chemical and transportation security sectors. Congress has relied on rules and regulations to accomplish their objectives. He notes that tax incentives are easier to run for multiple year projects without worrying about them being continued past their useful life. He suggests that the tax credit could be weighted to provide more money in the first year, enhancing its stimulative affect. Then, in subsequent years, the credit would reduce until the credit disappeared in year four or five. Tax Credits Urge not Command There are a number of issues with tax policy as a tool for social or political engineering that Prieto overlooks in his article. First, without declaratory rules directing the same objective, there is no way for tax credits to ensure (near) universal compliance. In the case of security measures at high-risk chemical facilities, there is no reasonable tax credit that would convince all facilities to employ armed guards, for instance. For most regulatory requirements this might not suffice. For chemical facility security rules it would allow facilities to decide which requirements it would want to comply with and a major factor in that decision could be the size of the tax credit. But there are no specific security measures required under CFATS (there are only Risk Based Performance Standards), so this might not be a problem. Creative Tax Writing Since it is too late to get tax credits for chemical facility security spending into the stimulus bill, perhaps the Congress could look at adding such tax credits to the reauthorization of CFATS. It would add an additional level of complexity to the legislative process since the House Appropriations Committee would probably have to sign off on the bill before it could come to the floor for a vote. Tax credits could be tied to the tier level assigned to the facility. Tier 1 facilities could receive a higher maximum tax credit than a Tier 4 facility. This would reflect the higher security levels required for the riskier facilities. Congress could target the tax credits to encourage capital spending; spending that would have a more wide spread effect in the general economy. They could target the tax credits to those performance standards that require construction or equipment installation; RBPS #1 – Restrict Area Perimeter, or RBPS #2 – Secure Site Assets would be good examples. Even more specificity could be achieved by targeting specific metrics listed in the Risk Based Performance Guidance document; Metric 1.2 – Vehicle Barriers, or Metric 2.4 – Monitoring and Surveillance for example. Finally, the tax credits could be targeted at security measures that are the most controversial. Such a tax credit could provide an incentive to add an armed response force to a Tier 1 facility security plan. Or a tax credit could be used to offset the salary for a trained security manager. Incentives for Industry Support The other thing that these tax credits could be used for is to buy industry support for chemical facility security legislation that contains some provisions that are not readily acceptable to industry. No level of tax incentive would be adequate to get industry to support the most extreme IST provisions (mandatory replacement for a list of specific chemicals, for instance), it might make industry more amenable to developing a workable IST provision. With the Homeland Security Committee preparing to work on the reauthorization legislation for CFATS it is a good time for industry to talk to Congress about how tax incentives could be used to support that program and increase chemical facility security.

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