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Study highlights benefits of reducing coal tax

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World Coal,

A proposed reduction in West Virginia’s coal severance tax – a levy on coal production – would provide multiple economic benefits to the state’s economy, according to a new report from PwC.

Legislation has been proposed to bring the coal severance tax down from 5% – one of the highest rates in the country – 2%. The move is currently opposed by state Governor Ear Ray Tomblin and state legislators on the basis that it could results in a loss of annual revenue of more than US$100 million.

But that is not correct, according to the PwC study, which found that reducing the severance tax would lead to an increase of US$299 million in West Virginia’s GDP, as well as creating 1864 direct and indirect jobs and boosting labour income paid to workers by US$132 million.

“The economic study PwC released today demonstrates that quick legislative action on coal severance tax relief can significantly reduce this hemorrhaging of jobs,” Chris Hamilton, Senior Vice President of the West Virginia Coal Association (WVCA), told The Intelligencer/Wheeling News-Register newspaper. “In other words, if our legislature fails to enact the 3% rate cut immediately, these savings would not occur and the consequences would be disastrous.”

Governor Tomblin is already planning to planning to remove a 56 cent per short ton tax on coal production that was imposed to help pay of workers’ compensation debts. But the severance tax is particularly controversial, as it has been sighted as the reason behind a number of recent layoffs in the West Virginia coal industry.

Last month, the President and CEO of Murray Energy, Robert E. Murray, blamed the layoff of 674 coal miners on a US$7.6 million severance tax payment. “West Virginia’s excessive coal severance tax is a significant cause of the recent layoffs,” the WVCA’s President, Bill Raney said, also speaking to The Intelligencer/Wheeling News-Register. “It must be reduced immediately to prevent more job losses.”

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