Huuki introduces severence tax legislation

Upper Peninsula mining companies could help create jobs and become stronger financially under landmark legislation to replace a myriad of mining taxes with a single, fair severance tax, State Rep. Matt Huuki announced today.

House Bills 6007-6012, introduced by Huuki, would place a 2.75 percent severance tax on gross mineral value on specified non-ferrous metallic minerals such as copper and nickel.  The tax would replace the property tax, corporate income tax, sales tax and use tax that mining companies currently pay.

“The new severance tax is a dynamic reform that will be good for jobs, good for our communities and good for economic development here in the Upper Peninsula,” said Huuki, R-Atlantic Mine.  “The tax reform proposal helps protect existing mining jobs while encouraging new economic growth in the area.  It removes uncertainty for our mining companies while allowing new start-up companies to become established in local communities.”

Sixty percent of the revenue from the severance tax would be retained by counties, townships, school districts and the school aid fund.  The remaining 40 percent would go into a rural development fund to support long-term regional economic opportunities.

Huuki said the rural development fund would provide funding for infrastructure improvements such as broadband/Internet connectivity, energy, rail and talent to strengthen local communities.  In addition, the fund could address energy issues that have been hampering job creation and new business development in the Upper Peninsula.

Currently, mining companies must pay a static tax regardless of how much they earn.  If, for example, metal prices plunge, mining companies are still obligated to pay high taxes, jeopardizing the mine’s future sustainability.

“Right now mining companies are locked into a specific tax no matter how much they earn, making it extremely difficult for these job providers to weather a poor economy,” Huuki said.  “Under my proposal, when mines prosper so will communities, and if prices fall, there is flexibility to ease production and keep local residents on the job.”

The bills are now in the House Tax Policy Committee for consideration.