Posted by: coalfreewa | January 21, 2010

Closing Coal’s Tax Loophole

The Dirt on Coal

http://daily.sightline.org/daily_score/archive/2010/01/20/closing-coals-tax-loophole

Closing Coal’s Tax Loophole

Posted by Jennifer Langston

01/20/2010 03:45 PM
If it’s good for gold bullion, why not coal?

Last week, Washington Governor Christine Gregoire came out crusading for closing tax loopholes to to shore up the state’s crumbling budget. Here are some things that made her list: sellers of gold bullion, cattle operations, free-riding banks, out-of-state businesses, chili canners masquerading as meat processors and corporate board members collecting big checks.

Here’s one that didn’t: a $4 million annual sales tax exemption on out-of-state coal burned at TransAlta’s Centralia power plant, Washington’s largest single source of greenhouse gas emissions.

It’s a curious omission, especially from a governor who talks so often and eloquently about clean energy as a solution to the state’s economic woes.

With a $2.6 billion budget shortfall (following a year when services were already slashed), you might also assume the governor would claw back every dollar possible to preserve things that voters value, like schools and transportation solutions. On this front, though, the Legislature has had to take the lead with SB6573, which would eliminate the sales tax exemption for coal, a dirty source of energy that’s truly outlived its usefulness.

Prime sponsor Sen. Eric Oemig (D-Kirkland) says ending the coal subsidy is a “no brainer” in this economic climate:

Why would you help buy dirty coal when you’re actually trying to tackle greenhouse gas emissions and pollution generally and support renewables like wind and solar and geothermal? Why would you give away $4 million with no strings attached? $4 million buys a lot of lunches for school kids or health care for the elderly.

There’s also some interesting history behind the tax exemption that bears some scrutiny, especially since Centralia is the only coal-burning power plant in Washington — and therefore the only one that enjoys the subsidy.

In the late 1990s, the Legislature essentially agreed not to collect sales tax on the coal Centralia burns in order to help offset the considerable cost of installing new equipment to reduce the plant’s pollution. But the subsidy was originally contingent upon the plant getting at least 70 percent of its coal from the local mine next door, an incentive to preserve some of the best blue-collar jobs in Lewis County.*

The requirement to buy local coal was dropped along the way. So when Centralia’s new owners (the Canadian company TransAlta Corp.) closed the mine in 2006, dealing a huge blow to a struggling local economy, the tax break remained in place. Now Washington is subsidizing the purchase of millions of tons of out-of-state coal from Wyoming and Montana. (And does a company that earned $3.1 billion in revenue last year seriously need the subsidy?)

Legislation introduced last year to eliminate the coal tax exemption would have directed some of the money to re-training any displaced workers at Centralia, which would be a fair use for it. (The legislation didn’t pass.) This year’s bill would simply return the money to the general fund, though Oemig says he’s “open to” ideas about how the money might be directed.

Closing the tax loophole on coal is an obvious opportunity to align the state’s tax policy with its climate and energy goals. Plus, I can personally think of lots of things I’d rather see the state invest in, whether it’s retraining workers for green-collar jobs, supporting renewable energy, or offering my kid a good education at a public school. How about you? Thoughts on how we could better spend $4 million in a bleak budget year?

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