Coal Tax Reality Check

When it comes to coal taxes, Duane Ankney needs to run a reality check.

Senator Ankney, who hails from Colstrip and is proud to be a retired coal miner, was in Longview, Washington this week promoting the construction of a terminal through which, he hopes, millions of tons of Powder River coal will someday be exported to Asia.

It’s easy to understand Ankney’s enthusiasm for this project. The coal industry has been taking it on the chin recently.  In the face of competition from renewables and, especially, natural gas, the electric power industry is moving away from coal as a fuel, and domestic coal consumption is falling. As the Clean Power Plan goes into effect and states are required to reduce their carbon emissions, the decline will almost certainly accelerate. So the only potential bright spot for coal – such as it may be - is exports.

Now nobody in their right mind is going to deny that coal exports will be good for the economy of Colstrip and Rosebud County, or for the miners and their families who Ankney represents. And it’s certainly okay for Ankney to be promoting those exports however he can – after all, all politics being local, the guy’s just doing his job.

But what’s not okay is for the senator to make a bunch of fanciful claims about the importance of coal to the whole rest of the state in order to scare people into propping the industry up, no matter what the consequences. And that’s apparently what happened in Washington. According to the Longview Daily News, Ankney told the local folks who are worried about the effects of the terminal on their community, that “Montana depends on coal taxes.” Those taxes “pretty much keeps the wheels greased and the Montana economy running.”

This is simply outlandish. In 2013, the last year for which I can find complete data from the US Census Bureau, the state and Montana local governments collected a total of about $3.85 billion in taxes. That same year, according to the latest Montana Department of Revenue Biennial Report, coal paid severance and gross proceeds taxes of a tad more than $76 million, or 1.9 percent of the total. That, by way of comparison, is about the same as smokers paid in cigarette taxes.

But wait, there’s more! Taxes are actually a relatively modest proportion of the total revenue of the state and local governments. There’s also boatloads of money from the Federal government, hunting license fees, University system tuition, interest earnings, property sales, etc., etc. Add all those revenues, including taxes, up, and you come up with a total for 2013 of $8.06 billion, about .9 percent of which comes from coal. In case you can’t quite wrap your head around that number, the picture above shows the total revenue pie, including the slice of revenue coming from coal. If you’re having trouble seeing that slice, well, that’s the point. And if you’re having trouble figuring out how we can possibly be dependent on that miniscule slice to "pretty much" keep the "wheels greased and the Montana economy running," that’s also the point.

Senator Ankney will no doubt want to argue that because some coal severance tax revenues are earmarked for programs like Long Range Building, those programs are dependent on coal taxes. But it’s not true. If the coal tax revenue we are collecting today were to disappear overnight, we could continue to fund every expenditure we are funding right now, and still have a hefty surplus and money in the bank.

I’m not denying that declining coal production means real trouble for coal miners and their families and communities. But in thinking about the future of coal and climate policy, we shouldn’t be stampeded into thinking that lower production spells disaster for the state’s economy or the public purse, because it just isn’t so.