Coal miners throughout the Ohio Valley region have endured significant threats during the previous few years. The threats have come from several places but all would seemingly result in the same negative result, fewer jobs for our coal miners and less money for our local economies.
We are sharing an article about the need to lower taxes to ensure that our coal industry remains competitive.
By David Gutman
The West Virginia House of Delegates shelved large tax cuts for the coal and gas industries passed by the state Senate last week, opting instead to study the cuts over the course of the next year.
The bill (SB 705) would have cut the severance tax paid by the coal and gas industries by 40 percent by the 2019 fiscal year. It passed the Senate last week 19-15, with almost exclusively Republican support.
It also would cost the state more than $100 million annually, according to estimates, and lawmakers are struggling to close a gaping hole in next year's budget, caused, in large part, by plunging severance tax collections.
The House is working on a budget bill that would take about $30 million from the state's Rainy Day Fund to balance the budget, an idea that Gov. Earl Ray Tomblin opposes.
The largest coal producer in the state blasted Republican House leadership for nixing the tax cuts.
“The leadership of West Virginia's House of Delegates and, particularly, Speaker Tim Armstead, have abandoned our coal miners today,” said Gary Broadbent, a spokesman for Murray Energy.
Bob Murray, CEO of Murray Energy, has been calling for an immediate cut in the state's severance tax for nearly a year. Murray also gave $250,000 to a conservative super PAC ahead of the 2014 elections, to help swing the West Virginia Legislature to Republican control.
However, Murray Energy indicated that it would like the state to dip much deeper into the Rainy Day Fund, so it can pass the tax cuts.
“For a state with a $784 million Rainy Day Fund in place, it is unconscionable for Speaker Armstead and the House of Delegates to turn their backs on coal mining families and the communities that depend on them,” Broadbent said.
Armstead, R-Kanawha, noted that the Legislature has already cut severance taxes on gas and coal this year.
“I think I can speak for our entire House of Delegates, including members of both parties, when I say we are deeply concerned about the job losses in our coal industry and the struggles our coal miners face,” Armstead said. “I'm hopeful that, with this study resolution, we can craft a comprehensive proposal that provides the necessary relief to our struggling coal industry while also creating an overall tax structure that adequately funds government without over-burdening our citizens.”
Broadbent and Senate Republicans argued that the tax cuts would have let West Virginia coal companies be more competitive and would have preserved coal jobs.
However, the storms battering the struggling coal industry — cheap natural gas, reduced international demand, depleted seams and federal regulations — are much broader than just the severance tax rate.
Broadbent would not respond when asked if the failure of the tax cut legislation would cause Murray to lay off more miners.
Tomblin has been vocal in his opposition to the tax cuts, which he says the state cannot afford.
“While Gov. Tomblin understands the challenges the coal industry faces, he has been steadfast in his opposition to further reducing the state's severance tax,” Tomblin spokesman Chris Stadelman said. “This proposal would not only cause a potential $100 million shortfall in the state budget but could also have a significant impact on local revenues for coal-producing counties.”
House Finance Chairman Eric Nelson, R-Kanawha, noted that the bill was written very quickly in the Senate and the House didn't receive it until last week, with just days left in the legislative session. It was written in and passed by a Senate committee on the last possible day.
“Every member of this body, both chambers, without a doubt, realizes the concern we have with our job losses in the coal sector and the negative effects even in the gas sector,” Nelson said. “At the same time, I think everybody realizes the fiscal constraint we're in right now, and we're structurally imbalanced; it's very difficult times right now.”
The bill was to be discussed in a House Finance Committee meeting Wednesday morning. After it was announced that the tax cuts would become a study instead of law, a coterie of coal and gas lobbyists filed out of the committee room.
“Our industry's in crisis right now,” said Bill Raney, president of the West Virginia Coal Association. “We're terrifically disappointed, because we need some assurance that we're going to be able to get our costs down so we can compete, keep the miners working, keep the mines open.”
Coal and gas pay a 5 percent severance tax on the total value of the minerals they extract from the ground. That tax rate would fall to 4 percent in July 2017, and then to 3 percent in July 2018.
The state Tax Department estimated that the tax cuts would have cost the state $55 million in fiscal year 2017, $105 million in 2018 and up to $129 million in each year after that.
Nelson noted that, since the tax cuts would not have begun until 2017 anyway, a study was the appropriate thing to do and lawmakers could still pass tax cuts next year that would go into effect at the same time.
In the Senate, Democrats had called the tax cuts a giveaway to industry and noted that there was no guarantee they would save a single job.
“We're adding another $100 million-plus hole in our budget, without any hope or without any realistic projection that it will do one darn thing or hire one other person,” Senate Minority Leader Jeff Kessler, D-Marshall, said last week.
The tax cuts would have cost counties, which get a portion of severance tax revenues, $2 million in 2017, $4 million in 2018 and $6 million each year thereafter, the Tax Department estimated.
Counties, already struggling with disappearing mines and shrinking revenue, expressed fear at further revenue declines if the cuts went into effect.
“It's going to cripple us,” Boone County Commissioner Mickey Brown said last week. “We're crippled anyway right now.”