The Inflation Reduction Act (IRA, P.L. 117-169) permanently extended the excise tax on coal funding the Black Lung Disability Fund, ending the fund’s longstanding funding limbo. This permanent extension will decrease the deficit and ensure that coal companies fund their obligations, not the American taxpayer.

The Black Lung Disability Trust Fund was established by the Black Lung Benefits Revenue Act of 1977 to fund disability payments to coal mine workers afflicted with pneumoconiosis, also known as black lung disease, and their families. The trust fund was initially financed by an excise tax of $0.50 per ton of coal sold from underground mines and $0.25 per ton of coal from surface mines, capped at 2% of the coal’s sales value. (For a more in-depth analysis of the Black Lung Disability Trust Fund and coal excise tax, read our report here.)

Unlike other tax extenders that hand out tax breaks or tax credits to special interests, the excise tax rate provision maintains the tax on the coal industry so that they bear the cost of the negative human externality associated with their product reducing taxpayer liability for the disability payments. Congress has increased the coal excise tax several times because revenues from the excise tax have not been enough to cover all the claims paid by the trust fund. The excise tax was increased to $1.1 per ton on coal from underground mines and $0.55 on coal from surface mines, not to exceed 4.4% of the sales price in 1985, extended in 1987 and again in 2008. Unfortunately, in 2019 Congress failed to extend the higher rate, and the tax was returned to the original 1977 level. After letting it lapse for a year, Congress extended the higher excise tax rate till December 31, 2020, through the Further Consolidated Appropriations Act of 2020 (P.L. 116-94) and again till December 31, 2021, in the FY2021 Omnibus (P.L. 116-260). The IRA finally ended the one-year extensions and permanently extended the higher excise tax rate.

According to the Joint Committee on Taxation (JCT), the permanent extension will decrease the federal budget deficit by nearly $1.16 billion over ten years. In addition, the permanent extension will ensure that the trust fund continues recovering the coal industry’s cost. Still, it is essential to note that the trust fund expenditures have consistently exceeded revenue, resulting in borrowing from the Treasury and hence from taxpayers almost every year since 1979. The Government Accountability Office (GAO) calculated in 2018, before the higher excise tax rate was about to lapse, that maintaining the tax rate would result in $4.5 billion in outstanding debt to the Treasury’s General Fund. Increasing the tax rates by 25% would result in -$0.6 billion outstanding debt. Although the permanent extension is a step above letting the tax rate lapse to the original 1977 level, it does not guarantee taxpayers won’t be on the hook for the Trust Fund’s potential $4.5 billion debt.