Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, September 13, 1995 TAG: 9509130029
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: GREG EDWARDS STAFF WRITER
DATELINE: LENGTH: Medium
The subcommittee, meeting in Roanoke on Tuesday, voted to ask the 1996 General Assembly to double the credit it enacted this year and let coal companies claim it beginning next year instead of waiting until 1999, as the current law allows.
The purpose of the credit is to encourage companies to mine coal that otherwise wouldn't be economical to retrieve and thus increase coal company profits, preserving existing jobs and creating new ones in the process.
A tax credit provides a dollar-for-dollar reduction of a company's or individual's tax bill and is different from a tax deduction, which reduces the adjusted gross income on which income tax is computed.
This year's General Assembly enacted legislation providing a 60-cent credit for each ton of coal a company mines underground from seams that are less than 33 inches wide; 50 cents for seams 33 inches and wider; 25 cents for coal mined by surface methods; and 1 cent for each million BTUs of natural gas produced from coal beds.
However, researchers for the Center for Coal and Energy Research at Virginia Tech and the Southwest Virginia office of the University of Virginia's Weldon Cooper Center for Public Service told the subcommittee that the tax credit stems only marginally the projected drop in Virginia's coal production and coal-related jobs.
Production, which stood at 47 million tons in 1990, dropped to 38.8 million tons last year. And Virginia Tech projects that even with the benefit of the credit enacted this year, production will continue to decline steadily to 26 million tons annually by 2005.
If the tax-credit rates were doubled across the board, coal production could be maintained at near 1994 levels through 2001 and would drop only to 30 million tons by 2005, according to Tech projections.
Virginia's mining employment, which fell from 11,000 jobs in 1991 to 8,500 this year, also would maintain current levels longer and drop less quickly if the credit were doubled, according to UVa. The immediate effect of doubled credit would be to create 1,000 new coal mining jobs and 2,000 jobs in related businesses, UVa said.
A credit twice as large as the existing one also would do a better job of paying for itself than the credit now in place, said Carl Zipper of Virginia Tech.
The current credit would cost the state about $15 million in lost tax revenue, of which 10 percent could be recovered because of production increases spurred by the credit, Zipper said. But a credit twice the size would pay for half its costs in new taxes from increased coal production, he said.
Del. Victor Thomas, D-Roanoke, a member of the subcommittee, said he doubted the legislature would pass a proposal to double the credit, and he abstained when other members of the subcommittee voted to seek it. Thomas said he would like to see a higher credit but he was being realistic.
"I think we have to get every dollar we can get," said Del. Jackie Stump, D-Buchanan County. Stump, an official of the United Mine Workers, said he knows of cases in the coalfields where three families, each of whom used to have homes of their own, are living in one house.
Sim Ewing of the UVa center, which is in Wise, cautioned that the tax credit would cause the depletion of the region's coal reserves faster and that plans also must be made to cope with the social consequences of a declining coal industry.
by CNB