Gazette photo by Chip Ellis
Here’s something you probably won’t hear the major candidates for West Virginia governor talking much about: It seems West Virginia’s coal industry pay significantly less in severance taxes than other mineral-producing states.
That’s what the fine folks over at the West Virginia Center for Budget and Policy had to say in this new blog post:
… It’s not surprise that the top severance tax states all are rich in coal, oil, gas, or all three. Alaska tops the list, with over 66% of state tax revenue coming from severance taxes. West Virginia comes in with over 7% of state tax revenue coming from its severance tax.
Their analysis continued:
So while West Virginia relies on the severance tax, it doesn’t do so to the extent of some other energy and natural resource intensive states. But which state actually taxes coal, oil, and gas the heaviest, and how does West Virginia compare? Instead of comparing the statutory rate for each state, a more accurate way to compare is to calculate an effective rate for each state.
One way that can be done is by using data from the 2007 Economic Census (the most recent year available). One data item from the economic census is the total value for shipments, and receipts for services for every industry, which, for the mining industry, would basically be the total value of all the coal, gas, and oil sold by the industry. By dividing total severance tax revenue by that number, you can come up with an effective severance tax rate for the mining industry.
Using this method, West Virginia has an effective severance tax rate of 3.2%, well below the average of 5.2% for the top ten states. Alaska had the highest effective rate at 11.2%. Of the ten state’s most reliant on the severance tax, West Virginia ranked 7th for effective rate. West Virginia also had a lower effective rate than neighboring energy producer Kentucky, and a lower rate than the western states whose production is growing more competitive with West Virginia every year.
Read the whole thing here.