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Should the Tax Code Subsidize Coal Mining Safety?

3 min readBy: Andrew Chamberlain

In the wake of recent high-profile coal mining disasters in Kentucky and West Virginia, Members of Congress have introduced legislation aimed at providing special targeted taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. preferences for investments in mine safety equipment.

Like all distortionary tax preferences enacted on behalf of rent-seeking industries, these proposals are hard to justify economically. In an excellent recent post, tax professor James Maule details the case against special tax provisions aimed at subsidizing coal mining companies:

The argument for mining industry tax breaks rests on the proposition that mining fatalities, injuries, and other problems can be attributable, at least to some extent, by the use of antiquated equipment. Companies don’t replace this equipment because it is expensive. In a market system, mine operators can choose to update equipment, close the mine, or gamble with the lives of miners by hoping all goes well…

Markets ought not support the proliferation of economic inefficient industries. If coal mining is an industry critical to the economic health of the nation, it needs to charge the true cost of mining coal, which includes the amortized cost of new and safe equipment. The tax law ought not to be used to prop up industries that cannot function viably in the economy…

The argument for these tax breaks proves too much, for it can be used to justify similar tax breaks for every other industry in which worker death and injury is a significant risk. Coal mining is dangerous. So, too, is other mining. Why should tax breaks for worker protection be targeted at the mining industry? What about the industries with the top ten occupational death rates, namely, logging, aircraft piloting, fishing, structural iron and steel work, refuse and recyclable material collection, farming and ranching, roofing, electrical power line installation and repair, delivery, and taxi driving? Would not the same “give them tax breaks so they can buy newer equipment and pay for better training” argument apply no less to these industries? The answer, unfortunately, is that deaths and injury in these professions don’t get nearly as much headline time.

And that brings me to the sad part of the matter: political posturing. Politicians seem more prepared to make electoral hay from a disaster than they are to work to prevent the disasters. The pattern is becoming routine. A catastrophe occurs, often because of bad planning, insufficient regulation, or simple inattention on the part of public “servants.” At that point, the politicians juggle for television face time. The tax-cut advocates among them immediately propose tax breaks to prevent the problem from happening again. Aside from the inescapable conclusion that tax breaks will not prevent future disasters, the proposed breaks add more complexity to the tax law, increase horizontal disequality, reward industries with the best lobbyists and public relations teams, and erode the nation’s overall, long-term financial health.

If the Congress truly wants to improve mine safety, it needs to stop with the tax bribes. It needs to enact laws directly related to mine safety, provide for the enforcement of those laws, enact penalties sufficient in deterrent effect, and come clean with the electorate. The same can be said of any other behavior that Congress wishes to encourage or discourage.

Read the full post here.