Sun editorial:

It doesn’t add up

Mining taxes should be changed to make sure the industry is paying its fair share

Tuesday, May 12, 2009 | 2:08 a.m.

Mining companies expect to pull $4.5 billion in minerals from Nevada this year, a 21 percent decrease from last year, according to projections compiled by the state Taxation Department. However, state tax revenue generated from mining is expected to drop significantly more — 52 percent — to $45 million.

How does that add up? It doesn’t, at least mathematically. Politically, the mining industry has thrown its weight around since the state’s founding. The industry has secured lucrative tax breaks and left other taxpayers, businesses and individuals, holding the bag.

The Nevada Constitution restricts taxes on mining to no more than 5 percent of net proceeds, and state law provides generous deductions for mining companies. The Associated Press reported that in the past five years the industry has been taxed on just 26 percent of the $25 billion worth of minerals taken from the ground. As a result, the mining industry pays a pittance in state taxes.

Lawmakers are considering removing some of the tax exemptions mining companies use. That should be common sense. The state faces an unprecedented budget deficit, and the mining industry — which enjoys gold prices over $900 an ounce — is clearly not paying its fair share.

Any plan to change mining’s tax deductions will certainly face opposition from the industry’s powerful lobby in Carson City and Gov. Jim Gibbons, who holds a mining geology degree and a hatred for taxes.

Lawmakers should resist the temptation to bow to such opposition, which in the past has scuttled such plans. As a result, Nevada has a tax system that is inequitable and insufficient to provide for the state’s needs.

Reducing the mining tax exemptions is an obvious solution, and we would hope the mining industry would work with the Legislature. Considering the profits the industry has reaped from Nevada, it should be willing and able to pay its fair share.

Discussion: 6 comments so far…

By Teaser

5/12/09 at 5:59 a.m.

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Jeez, what a novel idea. I've only been blogging this idea for the past two months. Glad you finally read your own paper.
By Patrick_R_Gibbons

5/12/09 at 6:50 a.m.

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"Fair share" is a meaningless term.

Why not make politicians cover the tax? They want the program tax them.

Mr. Greenspun's family has millions, why don't they donate it it?

All a corporate tax does is result in higher prices, lower wages, fewer jobs, and a lower return on investments. Corporations, afterall, are just a collection of people working together - they are a middleman for the taxman.
By neiman1

5/12/09 at 7:46 a.m.

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If a mining company spends $50 million to extract $52 million in ore they are taxed on the $2 million profit. In the meantime they are providing jobs and income for the state. Change the tax structure and they simply wont mine what doesn't produce more profit and the income to the state will drop and the jobs will be lost.

Look at a complicated problem from all angles and be prepared for unintended consequence. The easy answer of we want more doesn't always work out. Look at the effect City Center is having on the entire city and state.
By The_Onion

5/12/09 at 8:08 a.m.

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Someone show me a mining company that will close if we get rid of their deductions.

I guess they'll pack up their mines and take them with them when they head somewhere else?

Get rid of the deductions for starters... then lets reform 1872.
By opinion101

5/12/09 at 9:54 a.m.

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Who wrote this Editorial? Why does the "LA Sun" keep repeating stories over and over again? Everyone already has hashed through this before. Thats why newspaper sales are down, there is nothing new to read. Waste of money.
By hss46

5/12/09 at 4:33 p.m.

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Dear Mr. Gibbons: You are an educated man with a highly visible "bully pulpit" from which to be a positive influence on society. I wonder what your parents did to you to make you feel so anti-government that you continue to spew myths and inaccurcies in support of extreme libertarian views based on tortured and/or inaccurate factual assertions and incorrect conclusions.

Your statement "all corportate tax does is result in higher prices, lower wages, few jobs and a lower return on investment" is actually partially correct. Corporate tax does in fact result in lower return on investment. But then thats the point of tax. But to start a sentence with "all corporate tax" suggests a uniformity that doesn't exist. While it is conceivable that some corporate taxes might have some impact on employement, the reality is that, in today's global economy, large employers like WalMart hire the same number of people in their operations per $1,000 of gross sales/store area in Nevada as they do in California despite the lower tax burden here. And the wages they pay here are equally low. And their pricing structure is equivalent. Bringing WalMart's taxes in Nevada to the same level as in California would likely have little measurable impact on sales, prices, employment or wages compared to the revenue raised and the value to society of how those dollars are utilized. But that higher taxation would reduce its profits.

And if you think WalMart is a "collection of people working together" I urge you to work at one of its stores for a week or two. WalMart is a profit machine which crushes its workers for the benefit of its shareholders,mostly the descendants of the founder.

It is critical that tax structures be thought through and somewhat complicated to have the desired targeted effect while still raising the revenue needed. But that can be done.

All that being said, I suspect that you are less interested in finding a solution to the problems of governing than you are in making the process more hospitable to the corporate sponsorship which keeps your Institute afloat. I might think in terms of "hired gun" for those that have the ability to pay relatively small amounts to avoid much higher tax costs.