A new study compares the taxes Kentucky and neighboring states levy on natural resources, and recommends Kentucky set up a severance trust fund.
Kentucky taxes coal, as well as other natural resources. Most of the money goes to the state, but a small amount goes back to the counties where the coal was mined. The report by analysts with the Central Appalachia Regional Network lays out the different ways each of six Appalachian states handle the severance taxes.
“And each state, and these are six neighboring states, treats it differently, they collect it differently, they spend it differently,” says Kimber Simmons, who worked on the report and is the associate director for the Industrial Development Authority in Wythe County, Virginia.
The report makes the case for creating a severance tax trust fund to invest the money. Roy Silver contributed to the report, and teaches sociology at Southeast Kentucky Community and Technical College. He says that trust fund will be necessary to supplement state and county budgets after coal production has decreased.
“If you visualize this as a graph, the trust fund increases because it’s cumulative and the amount of money from severance tax decreases, because the resources are a finite resource,” he said.
The report also recommends that all states raise the severance taxes to five percent. Kentucky currently taxes coal at a rate of four-and-a-half percent.