Monday, July 30, 2012

Regional network suggests Appalachian coal states put some severance tax dollars into endowments

A coalition of citizens' groups in Central Appalachia is recommending that Eastern coal states follow the example of their Western counterparts and put part of their severance-tax revenue into endowments that would permanently provide earnings to help their regional economies. Seven states in the West "use severance taxes to create permanent trust funds that can help state economies in the future," reports Paul J. Nyden for the Sunday Gazette-Mail in Charleston, W.Va. "Many of those funds add up to billions of dollars."

A study by the Central Appalachia Regional Network notes that severance taxes represent a significant portion of state government income in two Central Appalachian states: nearly 9 percent of state revenues in West Virginia and 3.3 percent in Kentucky. In four other states covered by the group -- Maryland, Ohio, Tennessee and Virginia -- severance taxes generate less than one-tenth of 1 percent of the states' total revenues.

CARN, a diverse group of regional organizations assembled and funded by the W.K Kellogg Foundation, proposed that a minimum of 1 percent of all severance taxes be placed into permanent endowments in each state. "This would not only help these states meet many of their economic challenges but ensure that future generations benefit from the mineral wealth that is in their communities," said Ted Boettner, executive director of the West Virginia Center on Budget and Policy. The CARN study is available here.

The Kentucky-based Mountain Association for Community Economic Development, which is not part of CARN, earlier this year suggested a similar plan financed by an increase in the severance tax. If Kentucky raised the tax to 5.5 percent from 4.5 percent, it could create more than $700 million in a fund by 2035, MACED said.

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