After a rocky start, Congress and the president saved their best for last in 2017.
The historic tax cut that closed out the Trump administration’s first year defied a conventional wisdom that as recently as last summer gave Congress no chance to pass a major tax bill. A fractious Republican party, a controversial president and a toxic partisan atmosphere was thought to doom any major rate cut in 2017.
Washington may have surprised itself.
More important for household and businesses is that ushering in historically low tax rates should add muscle to an already powerful economic recovery. Lower taxes should stimulate additional investment in U.S. industries that support more high-wage jobs – jobs that Pennsylvania needs.
New equipment and technologies will make our industries better able to complete with Asian and European companies. Putting bigger paychecks in the hands of American workers will boost demand and help households reduce debt.
Even after the tax bill passed into law, critics doubted its long-term advantage. A stimulus the economy didn’t need, they said. But with marginal tax rates lowered for both individuals and companies, economists now see more comprehensive benefits.
“Cutting income taxes on individuals will power economic growth in the short run, and reforming them for businesses will do the same over the long haul,” said Harvard University economist Robert Barro. Naysayers also dismissed the tax cuts as a gift to the wealthy. But the Tax Policy Center finds that the bill as signed by the president will lower marginal rates this year for taxpayers across the income spectrum.
Industries important to western Pennsylvania will also get a boost, and none more so than coal mining. As surprising as the tax bill was last year, an even bigger surprise arose in the nation’s coal fields. From West Virginia to Wyoming, coal mining made a comeback, defying many who had read the industry its last rites throughout the year.
Instead, coal slowly emerged from a steep downturn that from 2009 to 2016 cost the industry roughly 54,000 jobs, shut down some 800 coal mines and closed 210 coal-based power plants. Battered by a combination of low natural gas prices and federal regulations targeting coal, the industry struggled as its share of nationwide power generation fell from roughly half to less than a third.
Then, during the past 12 months, coal responded to strong medicine that included a dose of regulatory relief from the Trump administration and a worldwide rebound in coal demand from growing economies. Last year coal exports soared by 67 percent.
Europe and Japan, having abruptly abandoned nuclear power, need U.S. steam coal to generate electricity. Exports of higher value coal used in steelmaking nursed other coal producers back to health. Meanwhile, here at home, a brutally cold winter throughout much of the U.S. has dramatized the value of coal. Frigid temperatures boosted reliance on coal-fired power plants in the first week in January, when coal supplied almost 40 percent of the power in the nation’s largest region, surpassing gas and renewable fuels.
The 2017 tax cuts should add further impetus to coal’s recovery and bolster other basic industries in Pennsylvania that rely on low-cost capital investment and low-cost energy. It took a while, but finally public policy is helping economic growth instead of fighting it.
Peter J. Magnotta is president of 18 Karat Inc., located in Eighty Four, Washington County, and specializing in mine site development, construction, maintenance and reclamation.