Questions raised on taconite tax rebateCompanies get some tax back if they invest in Iron Range plants.
By: John Myers, Duluth News Tribune
The Iron Range Resources and Rehabilitation Board approved $6.8 million in taconite tax rebates to Minnesota iron ore production plants Friday, but some lawmakers on the board are questioning the tax rebate program.
The money approved will go to projects that upgrade technology and make key improvements that are expected to add life to the taconite mines and processing plants, helping to ensure Iron Range jobs.
The projects include money for ArcelorMittal’s Minorca mine in Virginia, Magnetation’s waste ore recovery operations across the Range, Mesabi Nugget’s unique iron nugget plant near Hoyt Lakes, Northshore Mining in Silver Bay and Babbitt, and United Taconite in Eveleth and Forbes.
U.S. Steel’s Minntac plant in Mountain Iron and Keewatin Taconite received rebates last month for projects under the Taconite Economic Development Fund.
But state Rep. Carly Melin, DFL-Hibbing, an IRRRB board member, noted the tax rebate program has doled out $174 million to mining companies since 1993, and she questioned whether the rebate was a good value for money that otherwise might have gone to other Iron Range business
diversification or public projects.
“I have ongoing concerns,” Melin said at the IRRRB meeting in Eveleth. “It’s an extremely costly program.”
Melin suggested lawmakers revisit the rebate during the 2014 legislative session in St. Paul.
“The way it is right now isn’t working … $174 million in 20 years is a lot of money. And we end up giving them tax rebates when times are good, when they have large profits,” Melin told the News Tribune. “We can call it reinvesting in the mines … and it is. But it really is a tax break for the mines. Do they really need a tax break right now? Probably not.”
Melin suggested that the rebate money might be banked during good times and awarded for projects when times are tough in the cyclical mining business, when the plants are mostly likely to need a cash infusion.
“We’re definitely going to look at some changes in the 2014 session,” Melin said.
Lawmakers this year started down that road, changing the state law to require an even 1-to-1 match of company dollars for every $1 of tax rebated starting in 2014. Until now, companies were required to match only about one-third of the tax rebate, Melin said, although they often matched much more.
For 2014, the taconite-production tax is slated to rise to $2.60 per ton. The current rebate amount is 34 cents per ton. (Mining companies pay a so-called “occupation tax” that amounts to a state corporate income tax.)
State Rep. Tom Anzelc, DFL-Balsam Township, said the current system of taxing and rebating isn’t “being intellectually honest” with the public. “It’s not straightforward. It’s not transparent,” Anzelc said, agreeing that the tax rebate law may need to be adjusted.
State lawmakers decide each year whether to raise or lower the tax on taconite produced and shipped. The companies pay the production tax instead of local property taxes. Mining companies often urge that the tax be frozen or cut. But Iron Range homeowners and businesses wanted the taconite tax maintained to help offset their property taxes.
Iron Range lawmakers have been skeptical of cutting taxes simply to keep more money in the pockets of mining companies that are based out of the state. The rebate was the brainchild of Iron Range lawmakers in 1993, considered a compromise that cut the effective tax rate while making sure the money stayed local and helped encourage local jobs. Lawmakers added a provision requiring local steelworkers unions to sign off on the projects before they are approved by the IRRRB.
State Sen. Dave Tomassoni, D-Chisholm, defended the rebate program, saying there has been significant investment made by the mining companies in the Iron Range plants that would not have happened if not for the rebate, which encourages corporate boards to approve projects in Minnesota.
State Sen. Tom Bakk, DFL-Tower, agreed.
“The companies are spending tens of millions of dollars each year that we never see,” he said. “The companies are investing a lot of money” in their Minnesota operations.
The IRRRB unanimously approved all of the rebate projects Friday, in addition to all of the economic development loans and grants on its agenda.