Elimination of “Inconsistent” Coal Tax Credit Would Cost Jobs, Energy Consumers

By Delegate Wendell R. Beitzel

In a recent news article posted by Southern Maryland Online, a spokesman for Governor Martin O’Malley stated that a tax credit that retains and creates jobs in Western Maryland was, “simply inconsistent with the administration’s policies.” This legislative session marks the third time Governor O’Malley has targeted the Maryland-mined coal tax credit for elimination. It is my hope that the third time is not the charm for the Governor’s efforts.

Coal has been the cornerstone of the local economies of Allegany & Garrett Counties. Frostburg State University, for example, was established by coal miners who wanted a better life for their children. It was the toil of those miners that has paved the way for many of Maryland’s educators, legislators, and business leaders.

The industry continues to provide jobs to many of Western Maryland’s residents today. These jobs pay approximately double what other industries within our counties pay. Further, the industry contributes to our local tax bases.

Its workforce frequents local establishments and utilizes services offered by other area businesses. There are restaurant owners in Garrett County who open early to provide breakfast for mine workers. Many independent truck drivers are employed to shuttle coal back and forth. Heavy equipment mechanics are also employed to make repairs to machinery. These ancillary industries are frequently overlooked by opponents of the tax credit, but they cannot and should not be ignored.

The Maryland-Mined Coal Tax Credit is utilized by Maryland’s electricity providers who burn Maryland mined coal. These figures are reported on the electricity provider’s franchise tax. These funds are then rebated to the producers through already provided-for contractual obligations. The funds, in turn, are used to retain or add to the producer’s workforce, or towards the purchase of new equipment. If the Maryland General Assembly eliminates this credit, Maryland’s electricity consumers would have to bear the increased cost.

The industry has already, on two separate occasions, seen this tax credit reduced. The Allegany County Delegation at the behest of the Ways & Means Committee, introduced HB 487 / SB 335:  Tax Credit for Maryland-Mined Coal (2006). This provided for the “stepping down” and eventual sunset of the tax credit by 2020. A further reduction through the Budget Reconciliation and Financing Act (BRFA) of 2009 further reduced the cap from $9 million to $4.5 million. That cap is to be reduced further in the outgoing years until its eventual elimination.

One would be hard pressed to find any other tax credit, of any kind, that has a similar statutory framework and sunset provisions. Unlike other tax credits that are much greater in amount and that have had lukewarm results at best; this credit has a proven track record of retaining and creating jobs in Western Maryland.

Efforts to eliminate the Maryland-mined coal tax credit began in 2004. An effort was again mounted during the 2005 Legislative Session. Other attempts during the 2007 Special Session, and recently through the 2009 and 2010 BRFA actions have all been rebuffed by this committee, the House Appropriations Committee, the Senate Budget & Taxation Committee and by the Maryland General Assembly. It is my hope that these committees, once again, resist this latest attempt to adversely affect Western Maryland’s economy and the jobs that are dependent upon this credit.