Does Montana have a point?
Are you willing to pay a little more for your electricity to help ensure that you will always have plenty of it? If so, how much more? These are among the points to consider as Congress pursues the state "severance tax" issue left to it by the Supreme Court last week. Severance taxes began more than a century ago as levies placed by states on minerals "severed" by extraction within their borders. Today the focus is on minerals producing energy, such as the coal which Montana taxes at 30 percent -- a rate which the court said was not too high. the effort in Congress is to limit the severance tax on coal to 12.5 percent, which is more than some states charge. The way the justices have been deferring to the legislators lately, it seems likely that what Congress wants Congress will get.Skip to next paragraph
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Which puts all the more responsibility on Congress to be thorough about a complicated combination of state and national issues. In the era of the new federalism it would seem that state tax practices should not lightly be intefered with. Yet in the era of considering the seabed as the common heritage of mankind a case might be made for considering the minerals in any state as the common heritage of the American people.
Montana's severance taxes apply to the coal sold within the state as well as outside it. But for users elsewhere the delivered price of coal is many times higher anyway because of transportation costs. The severance tax benefit for Montana looks like a place to cut back even though it is much less than 30 percent of the delivered price. At the same time, coal from an Eastern state that begins at a higher price than coal in Western states can have a lower percentage tax and bring in proportionnately more money in absolute terms. A state importing coal often gains more in sales taxes on the electricity generated by a ton of coal than the exporting stage gains from the severance tax on it.
To return to the consumer, chances are that your electricity costs more than it would if Montana and other fuel-producing states did not levy severance taxes on various fuels. But your supply of electricity itself could be less certain if these states were not allowed to collect enough revenues for the public services to sustain the needed mining activity.
The latter is a point of particular concern to Montana, Wyoming, Colorado, and the other Western noncoastal states (plus Alaska) associated in WESTPO (Western Governors' Policy Office). Their production of natural fuels is booming in response to the nation's energy needs. They foresee a boom in synthetic fuels. They find budgets and resources facing new strains as they expect a hundred percent rise in employment in these fields between 1979 and 1990. Counting indirect employment and employee dependents, the total population increase mounts to 1,025,000. They see a need for thousands of new classrooms, more than 200,000 new dwelling units, along with more police, firemen, doctors, hospitals, municipal office space, water supply, and waste treatment.
To these Western states the severance tax is vital to support the human, environmental, and other aspects of orderly resource development -- development necessary to the whole country. How much do they really need? How can its channelling to constructive purposes be assured? These are some of the questions for Congress as it walks the path the court has offered it.