Determination of the existence of economic rents accruing in the United States coal industry and implications of increased coal severance taxation

Thesis/Dissertation · Wed Jan 01 04:00:00 EST 1986

OSTI ID:6678200

Noser, T C

To raise necessary revenues, many energy rich states have turned to greater utilization of severance taxation. Increases in oil and gas prices and the decline of nuclear power led to an increase in the competitiveness of coal, and perhaps to the generation of economic rents within the coal industry which state legislatures would hope to reappropriate via severance taxation. The purpose of this research is to determine if economic rents have been generated within the coal industry, and to analyze the implications of increased severance taxation. A mine simulation model was used to estimate the price per ton of coal a typical firm would have to charge in order to cover all operating costs and earn a normal rate or return. Such estimates were made for eleven major coal producing states and compared to actual price data for the years 1978 through 1981. For each year, actual selling prices exceeded the minimum acceptable selling price necessary for firms to earn a normal rate of return, i.e., economic rents were generated in each year, totalling nearly $2.5 billion in 1981. Regarding the implications of increased severance taxation, it was argued that will the exception of a pure profits tax, any tax imposed on a profit-maximizing firm would discourage production and investment.

• Research Organization: Alabama Univ., Birmingham (USA)
• OSTI ID: 6678200
• Country of Publication: United States
• Language: English

Related Subjects

01 COAL, LIGNITE, AND PEAT
015000* -- Coal
Lignite
& Peat-- Economic
Industrial
& Business Aspects
29 ENERGY PLANNING, POLICY, AND ECONOMY
290200 -- Energy Planning & Policy-- Economics & Sociology
294001 -- Energy Planning & Policy-- Coal
COAL INDUSTRY
ECONOMIC IMPACT
INCOME
INDUSTRY
MATHEMATICAL MODELS
NORTH AMERICA
PRICES
SEVERANCE TAX
STATE GOVERNMENT
TAXES
USA