ERIC Number: ED164174
Record Type: Non-Journal
Publication Date: 1978-Sep
Reference Count: N/A
State Taxation of Mineral Deposits and Production. Rural Development Research Report No. 2.
Stinson, Thomas F.
Alternative methods for taxing the mineral industry at the State level include four types of taxes: the ad valorem tax, severance tax, gross production tax, and net production tax. An ad valorem tax is a property tax levied on a mineral deposit's assessed value and due whether the deposit is being worked or not. The severance tax is usually an exise tax paid by the producer for the privilege of extracting resources from the soil. The gross production tax is almost identical to the severance tax, but is based on a percentage of the dollar value of the ore extracted rather than a fixed amount per ton. The net production tax is also similar, but is more closely related to a net income tax because companies are allowed to deduct some expenses from gross revenues in order to define net taxable production. This document compares the four kinds of taxes on the basis of ease of administration, social justice, consistency with national economic goals, and revenue adequacy. It cites the severance tax and gross production tax as appearing to provide the best vehicles for taxing mineral activity. Because the construction and development phase of a mine causes financial strain for a community in providing new services (e.g., schools and expanded water and sewer systems) before new tax revenues become available, discussion is given to programs by Montana, North Dakota, Utah, and Wyoming to reduce the fiscal impact of new mineral development. An overview of mineral tax laws in each of the 25 major mineral producing states is also given. (DS)
Publication Type: Reports - Research
Education Level: N/A
Authoring Institution: Economic Research Service (USDA), Washington, DC. Economic Development Div.