The Tax Bills Gift to Big Coal [View all]

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The legislation is a boon to fossil fuel companies not only because of what it includes, but what it doesn't.

By now, it’s no secret that the sweeping tax reform package approved by Congress last week includes a bunch of provisions that help the oil and gas industry. As the Washington Post reported, cutting the corporate income tax rate alone will likely add $1 billion to the profits of U.S. oil and gas exploration and production firms. Oil refining companies stand to do even better, according to one analyst who estimated that those companies’ earnings per share will increase by an average of 23 percent. The tax bill also opens up the Arctic National Wildlife Refuge in Alaska, the largest wildlife refuge in America, to drilling.

But there’s also something to be said about what the tax bill didn’t change: the billions of dollars in permanent, century-old tax subsidies for the fossil fuel industry. According to Oil Change International, the U.S. federal government provides a combined $14.7 billion in various annual subsidies for the fossil fuel industry, the vast majority of which remained untouched in the tax bill. And while the majority of those subsidies favor the oil and gas industry, 20 percent go toward incentivizing coal consumption and production. What’s more, the effective tax rate for coal—which is less than 1 percent—stays the same. In other words, the government still sacrifices billions in revenue every year to prop up coal, an industry that most energy analysts agree is dying.

“The coal industry fares incredibly well [with the tax bill],” said Janet Redman, the U.S. policy director of Oil Change International. “None of the handouts that they get now are taken away. They chug ahead with every tax break they’ve enjoyed last year, the year before, and some that have been in the books for decades. They’ve lost nothing.”

The coal industry does lose something, though it’s fairly small. The tax bill eliminates Section 199 of the U.S. tax code, which allows companies to deduct income attributable to domestic production activities. That means there will be no more so-called “domestic manufacturing deduction for mining,” which allows mining companies to claim a tax break intended for the manufacturing of goods. That subsidy cost the government about $45 million last year, according to the group’s most recent report on fossil fuel subsidies.


More: https://newrepublic.com/article/146388/tax-bills-gift-big-coal