In shaky economic times, Virginia doling out tax breaks
Saturday, March 12, 2011; 9:58 PM
For four years, the Virginia General Assembly has scrimped, scrounged and borrowed to pay for schools, highways, police, and public programs that care for the mentally ill, the disabled and the poor.
But even though the shaky economy has slashed at least $6 billion from Virginia's treasury, lawmakers have continued doling out millions of dollars in tax breaks to promote "green jobs," benefit wineries and help businesses relocate. Among them was this year's renewal of a $45 million-a-year provision for Virginia's two most powerful electric utilities and the coal mines that supply them.
The bill gives Virginia electric utilities that burn Virginia-mined coal more time to redeem or refund the tax credit. In practice, the tax credits, which are worth $3 per ton of coal, pertain almost exclusively to Dominion Virginia Power and Appalachian Power and the Virginian coal producers that supply them.
The bill's sponsor, Sen. William C. Wampler Jr. (R-Bristol), who represents a district in southwest Virginia's coalfields, said that the measure, which has been on the books since 1999, is necessary to protect thousands of mining jobs as Virginia's coal reserves shrink and the competition from other coal-producing states intensifies.
"Keep in mind that the idea of the credit is to keep Virginia coal competitive," Wampler said. "If you were to say, 'No, we're not going to have this tax credit,' you could argue that over time, you would drive Virginia's coal industry out of business."
But critics say the measure, known as the Coal Employment and Production Incentive Tax Credit, is corporate welfare. Together with an existing and related tax break for companies that extract the most hard-to-get coal and natural gas, the credits amount to at least $93.3 million a year for utilities and coal-mining concerns - or about $17,000 for each existing mining job. These two industries also cycle millions of dollars right back into the legislature through campaign donations.
"Virginia's tax credits reflect the spending habits of Washington, D.C., and the economic planning of the old Soviet Union," commented Del. Albert C. Pollard Jr. (D-Northumberland), who warned about the overweening powers of corporate lobbyists during a farewell speech on the floor of the House of Delegates after announcing his retirement. "It's not even helping the miners - it's helping the companies."
'Benefit to consumers'
Unused tax credits can be refunded, sold or shared with the coal producers; they can also be applied against any state tax, according to Virginia's Taxation Department. Pollard said the provision appears to allow utilities and coal producers to retroactively benefit from unused tax credits since 2006 and carry them forward beyond 2016.
"Not only is there a $45 million giveaway, you're giving it away for back tax credits," Pollard said. He credits the existence of the tax break to the powerful influence wielded in Richmond by the energy and natural resource industries.
Dominion, which reported annual net income of $2.8 billion last year, is Virginia's most generous political contributor, having donated $676,794 in the current election cycle, according to the nonprofit Virginia Public Access Project. The Richmond-based utility gave $216,294 to Virginia legislative candidates, while Alpha Natural Resources donated $164,664 and Appalachian Power gave $85,400. Wampler received $42,500 from energy and natural resources industries, including $25,000 from Alpha Natural Resources.
But C. Ryan Frazier, a spokesman for Dominion, said the credits in no way fatten Dominion's bottom line. The utility, which is closely regulated by the State Corporation Commission, factors the tax credits into the purchase of fuel as part of its rate calculations. Any benefit is, therefore, passed on to consumers, Frazier said. Taken together, the tax credits simply allow the utilities and coal producers to defray the higher cost of coal in Virginia relative to Kentucky or West Virginia, he said.
"We cannot make a profit off the Coal Employment and Production Incentive Tax Credit," Frazier said. "It's a benefit to coal producers. It can be a benefit to consumers."