The Colorado Department of Revenue should enforce a 1977 state law and increase the severance tax on future coal production in the state. But it should resist calls to impose a punitive and possibly illegal retroactive tax increase on the coal industry.
An opinion issued by Colorado Attorney General John Suthers not only clarifies that the state has the power to raise the tax on coal, it concludes that the Department of Revenue must do so.
The Colorado legislature originally imposed a severance tax on coal and other commodities in 1977 in House Bill 1076. In the case of coal, the levy was fixed at 60 cents a ton with the added proviso that the tax “shall be increased or decreased” in concert with changes in “the index of wholesale prices for all commodities prepared by the Bureau of Labor Statistics of the U.S. Department of Labor.”
Following that law, the Department of Revenue made repeated changes in the severance tax until the Taxpayer’s Bill of Rights passed in 1992. Following TABOR’s passage, the department froze the tax at the then-current level of 54 cents a ton in the belief that any future increase would require a vote of the people.
According to Suthers’ opinion, that decision was simply wrong. “It is incontrovertible that TABOR does not affect taxing schemes in place prior to the enactment of that amendment,” Suthers wrote. Since the law states the agency shall adjust the tax as the index rises or falls, the attorney general also found that “the department has no discretion whether to calculate and apply the coal severance tax according to the statutory formula.”
The department’s executive director, Roxy Huber, has scheduled a public hearing on the issue Tuesday, but it seems clear she is required to raise the tax to the level now required by the index, a jump of 18 cents to 72 cents per ton.
But Huber should disregard calls by a liberal advocacy group, Colorado Ethics Watch, to collect what it says is $20 million by retroactively applying the tax hike for three years.
First of all, Ethics Watch seems guilty of fuzzy math. The 18 cents per ton tax increase is exactly one-third of the existing tax, which yielded just $9 million this year. Imposing such an increase retroactively for three years would thus raise about $9 million, not $20 million. But the law allowing retroactive tax collections is designed only to recover sums lost to fraud or error. Imposing retroactive taxes on an industry that was only following state regulations in good faith would amount to an illegal ex post facto law.
About half of the severance taxes go to counties and cities impacted by coal production. Thus the increased tax will help pay for the roads and bridges necessary to support such production, which should provide some consolation to the coal companies paying the higher levy.
