trending Market Intelligence /marketintelligence/en/news-insights/trending/U6YqORN5HrPCZW6UsIZ4AQ2 content esgSubNav
In This List

Coal excise tax supporting black lung disability fund to decrease in 2019


Japan M&A By the Numbers: Q4 2023


See the Big Picture: Energy Transition in 2024


IR in Focus | Episode 10: Capital Markets Outlook


Infographic: The Big Picture 2024 – Energy Transition Outlook

Coal excise tax supporting black lung disability fund to decrease in 2019

As the 115th U.S. Congress comes to an end, so does the current rate of a tax on coal that compensates miners who have a disease they developed while working in the mines.

The federal excise tax on coal mined and sold domestically is the primary source of funding for the Black Lung Disability Trust Fund, according to the U.S. Department of Interior website. The fund provides benefits to disabled miners suffering from black lung disease, also known as pneumoconiosis, as well as their eligible survivors and dependents.

Since 1986, the excise tax rate has been 55 cents per ton of coal from surface mines and $1.10 per ton of coal from underground mines, capped at 4.4% of the sales price. The rates are scheduled to decline Jan. 1, 2019, to the levels set when the fund was established in 1978 — 25 cents per ton of surface-mined coal and 50 cents per ton of underground-mined coal and be capped at 2% of the coal's selling price.

Legislative efforts to extend the tax through 2019 were unsuccessful.

The excise tax generated about $450 million in fiscal year 2017 for the fund, which paid about $184 million in benefits in that period to more than 25,000 coal miners and dependents, according to a May report from the nonpartisan Government Accountability Office.

However, the fund had to borrow $1.3 billion from the U.S. Treasury's general fund in fiscal year 2017 for debt repayment expenditures, the GAO wrote, and a U.S. Department of Labor spokesperson said it carried a $5.6 billion deficit balance as of Sept. 30. The GAO projected that borrowing will likely increase from fiscal years 2019 through 2050, as coal production decreases and the excise tax rate is reduced, and could exceed $15 billion by 2050.

Phil Smith, spokesman for the United Mine Workers of America, said the original tax rate was not enough to keep the fund's deficit from "ballooning." While beneficiaries will not see a reduction in benefits, he said, taxpayers will pick up the cost that the coal companies were paying.

"The coal industry has historically been pretty stingy when it comes to things like this," Smith said, "and they're holding true to form."

The fund provides some compensation for sick miners previously employed by companies that are no longer in business and therefore cannot be held responsible for the benefits, while the coal producers that are still operating pay the benefits of their own eligible miners. Some people contract the disease in their 40s or 50s, Smith said, and are unable to continue working as it progresses.

The labor union is concerned that if the fund's deficit grows, policymakers will suggest cutting benefits to compensate. There is a "continued reduction" in the deficit at the current tax level, Smith said.

Ashley Burke, senior vice president of communications for the National Mining Association, said the trade organization believes the rate should decrease to its original levels as planned, adding that any other action "would be a tax increase on the industry at a time when it is working to stabilize after years of decline."

"Under the planned rate change, the tax will be sufficient to cover benefit costs for the fund," Burke said. "Extending the current higher tax rates is not only unwarranted, but it would further disadvantage coal against competing energy sources, likely leading to further coal job losses."

U.S. Rep. Liz Cheney, R-Wyo., said she was happy to see the tax extender eliminated while ensuring beneficiaries are still cared for, echoing Burke's comments about coal companies "slowly beginning to recover from Obama's war on coal."

Her fellow coal state advocate from the other side of the aisle disagreed, saying the fund was "already underfunded" and the disease is being diagnosed more frequently in young miners.

"Reducing the funding mechanism would have disastrous consequences for our coal miners who have already sacrificed so much and would only serve to exacerbate the fund's solvency issues," said U.S. Sen. Joe Manchin, D-W.Va.

Once the rate decreases in 2019, raising it may be more challenging because the industry will view it as a tax increase as opposed to an extension of an existing tax, Smith said.

"No coal company is in danger of going out of business now because they're paying this tax," he said. "It's not really a lot of money."