TCS Letter Supporting the Elimination of Double Subsidies for the Hardrock Mining Industry Act of 2009

Support the Elimination of Double Subsidies for the Hardrock Mining Industry

July 31, 2009

Dear Senator,

Taxpayers for Common Sense Action urges you to cosponsor the Elimination of Double Subsidies for the Hardrock Mining Industry Act of 2009 sponsored by Senators Feingold (D-WI), Cantwell (D-WA), and Feinstein (D-CA). For decades hardrock mining companies have enjoyed generous tax breaks, all the while paying no royalties for minerals extracted from federal lands and purchasing federal land for no more than $5 an acre. This bill takes an important step in ending this massive giveaway by repealing the percentage depletion allowance for hardrock mining companies.

The percentage depletion allowance permits hardrock mining companies to deduct up to 22% of their income before calculating taxes. While this alone is a benefit, the percentage depletion allowance (PDA) amounts to a double subsidy, since hardrock mining companies are not required to pay royalties on the minerals they extract. Other extractive industries like oil, gas, and coal pay royalty rates of 12.5% or more. The rationale behind a depletion allowance is that it allows companies to recover costs of capital investment. But deductions under PDA typically exceed the costs of capital investment—often several times over. Most countries have rejected the depletion allowance subsidy. However, in the U.S. PDA deductions cover around 70 minerals, with the deduction ranging from 5 percent for things like gravel and sand, to 15 percent for minerals such as gold, silver or copper, to as high as 22 percent for uranium.

The repeal of PDA will generate at least $250 million in savings over five years. Fifty-percent of these funds will be directed to an Abandoned Mine Reclamation Fund to address the enormous costs of abandoned mine clean-up. With taxpayers already facing upwards of $50 billion in clean-up costs, this fund will provide a much needed source of revenue.

For more than a century mining companies have enjoyed enormous benefits at the taxpayer’s expense and it is time to end this egregious giveaway. Public lands are taxpayer assets and should be managed in a way that preserves their value, ensures a fair return from private interests using them for profit and avoids future liability.

We invite you to join Senators Feingold, Cantwell and Feinstein in taking this important step to begin reforming the outdated policies that govern the hardrock mining industry. To cosponsor the Elimination of Double Subsidies for the Hardrock Mining Industry Act of 2009 please contact Kelly Reed (4-5323) in Senator Feingold’s office, Joel Merkel in Senator Cantwell’s office (4-3441), or Adriane Wynn in Senator Feinstein’s office (4-3841). If you would like additional information please contact me or Autumn Hanna at (202) 546-8500.

Sincerely,

Ryan Alexander
Taxpayers for Common Sense