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8 IRET Congressional Advisory 1 (1992)

handle is hein.taxfoundation/iretcgadv0008 and id is 1 raw text is: June 22, 1992 No. 8 DON'T TAX THE ENTIRE COAL INDUSTRY TO SUBSIDIZE ONE PART OF IT As the Economic Growth Acceleration tax bill (H.R. 4210) moved through the Senate Finance Committee, Senator John Rockefeller of West Virginia succeeded in attaching a proposal that he had previously introduced in Perhaps the Congress as stand alone that if this legislation (S. 1989). The Rockefeller amendment would ect h i establish a federal program for :ol tht a guaranteeing the health grouth benefits that the Bituminous bailot Coal Operators' Association (BCOA) had agreed to pay in the past, or may agree to pay in the future, to retired coal miners belonging to the United Mine Workers of America (UMWA) and to their dependents. The subsidy would be accomplished by means of a new federal payment-guarantee program and financed with a tax on all domestic and imported bituminous coal. The new agency could also obtain funds by borrowing directly from the U.S. Treasury, a power which, if exercised, would increase the national debt. Although the President temporarily blocked the payment-guarantee program from becoming law when he vetoed the tax bill, the issue is far from dead. Senator Rockefeller has succeeded in attaching the measure as one of the Senate Finance Committee's revenue provisions in the Comprehensive National Energy Act, H.R. 776. Accordingly, it remains prudent to take the measure seriously and to be cognizant of the economic damage it would cause, both in its own right and because of the precedent it would set. The Rockefeller proposal is troubling in a number of respects. Most coal producers have not been party to the BCOA-UMWA agreements. Is it fair for the federal government to make non- participating producers and, indirectly, their employees and customers, subsidize the labor contracts of competitors? Is the payment-guarantee scheme fair to the American public who would be exposed to the potential liabilities arising from the new program? businesses are expenses thanks graest concei is legislation wierie id become har-der- iext special inter-est so wvants a fiederal If coal producers and coal-using burdened with higher production to a tax increase, they would have less incentive to expand output and employment and be less capable of doing so. How is that consistent with a public policy focus on lessening the government's drag on productivity and job creation? Perhaps the gravest concern is that if this legislation were enacted, it would become harder to resist the next special interest group that also wants a federal bailout. The claims set in motion by that precedent could quickly become a major drain on taxpayers and the U.S. Treasury. If labor and industry groups with political clout come to believe that they, too, can obtain federal subsidies to rescue them from the costs of their mistakes and extravagance, they would have a strong incentive to behave irresponsibly because federal intervention would let them reap the benefits from their private collective bargaining actions while shifting many of the costs to others. It is amazing that another government guarantee program would be recommended when disasters like the federal guarantee program for S&L deposits have already wasted enormous resources, cost the Institute for Research on the Economics of Taxation IRET is a non-profit, tax exempt 501(c)(3) economic policy research and educational organization devoted to inorming the public about policies that will promote economic growth and efficient operation of the free market economy. 1730 K Street, N., Suite 910, Washington, D.C. 20006 Voice 202-463-1400 * Fax 202-463-6199 0 Internet www. ret.org

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