Shortchanging Wisconsin: GOP mining bill puts citizens last
There has been a lot of talk about SB-1, a rehash of last session’s failed mining bill that will eventually allow Gogebic Taconite to open a $1.5 billion open pit iron mine extending for miles in Wisconsin’s Northwoods. Most of the discussion has centered on environmental regulations and justifiably so. The main thrust of the legislation seems to be removing risk for the mining company and placing it on everyone else. But as egregious as all of that is, the environmental impact is not the only big problem with the bill. There’s also a money problem and it’s surprising how few seem to have their eye on that ball.
In a brief exchange with Sen. Bob Jauch of Poplar, I confirmed something that I already knew about the bill. It proposes to tax the mine based on net proceeds instead of on a per-ton production basis or the gross value. This is a really dumb thing to put into the legislation, unless you happen to own the mine. No legislator who puts the interests of constituents first should ever vote for such a provision. (Of course, many legislators may not. The Wisconsin Democracy Campaign reports that special interests backing the loosening of mining regulations have contributed $15.6 million to the Republican-controlled legislature and GOP Governor Scott Walker between 2010 and 2012. Some of the contributions to individual legislators are truly eye-popping.)
Look, I understand the approach that says if Wisconsin doesn’t have the mine to begin with, then the tax formula is moot. That is certainly true. But there is also a part of me that says we might well end up with that mine. Moreover, we all use a lot of steel and the iron for that has to come from somewhere. But if Wisconsin is to host a mine, then the benefits to the people of this state should be direct, substantial and measurable – and that doesn’t just mean income taxes from in-state workers and some trade from an out-of-state corporation.
We’ve all heard way too much for way too long about multi-billion dollar corporations that pay nothing in income taxes. At the same time, we know that we’re paying taxes to other states every time we fill our gas tanks or flip on the lights with electricity generated from coal-fired power plants because that is the way that severance taxes work. If there is to be an iron mine in Wisconsin, then we need to set up a system in which the state taxpayers are compensated fairly and surely; not some kind of accounting game for a corporation to use to dodge its responsibilities. That’s what companies do because that — along with buying off legislators state Supreme Court seats in a post-Citizens United environment — is what passes for best practices in business these days.
Using profits as the basis for a mining tax provides a loophole big enough to drive an ore train through and that is exactly what will happen. Moreover, a less profitable mine increases the risk that state taxpayers will end up holding the bag for reclamation at some point down the road, a lose-lose proposition. We need to put taxpayers first in line instead of last by adopting a tax that begins with the first ton of production and extends to the last. Taxing profits doesn’t do that and that is why it is a poor policy option.
Taconite is a commodity with a value that can be accurately determined at any point in time. It can be weighed and it is. Those are objective factors to use in determining a mining tax. If our legislators are working in our interests, then that is what they will be employing to ensure the best possible situation for the people they are elected to serve.