Ky. needs more tax revenue, but is coal off limits?

Kentucky, like many states, is facing a large budget shortfall in the upcoming fiscal year. While the state has been willing to raise taxes on signatue industries like tobacco and alcohol, and make cuts in education, raising taxes on coal appears to be off limits. Kentucky's coal severance tax rate and mine-permit fees have not changed in 30 years and some see raising those taxes as a way to help with the state's budget crisis.

"Tobacco and alcohol taxes jumped again just this year, and the cost of getting a driver's license rose from $1 to $12 over the last three decades," reports John Cheves of the Lexington Herald-Leader. "But coal still pays rates that were established in the disco era." Other coal-producing states are considering raising some taxes on the coal industry. "Tennessee lawmakers, for instance, sent a bill to their governor April 24 hiking that state's coal severance tax from 20 cents a ton to $1 a ton over four years," writes Cheves.

Coal advocates argue that raising taxes on coal could cost jobs and hurt rural economies that depend heavily on mining. "If you try to raise the severance tax, we'll squeal," said Bill Caylor, Kentucky Coal Association president. "Coal's squeals are hard to ignore in Frankfort," adds Cheves. "The coal industry spent more than $1 million on state political donations in recent years and $255,145 to lobby the last two legislative sessions."

Some urban lawmakers have argued that now is the time to revisit the coal severance tax rate, set in 1978 at 4.5 percent, and mine permit fees, set in 1982 at $375 per application plus $75 an acre. The state Division of Mine Permits collected $1.6 million last year , but its operational budget last year was $8.6 million. (Read more)