THE LEGISLATURE:

Mining eyed for tax hike via voters

Group says industry pays too little, may launch effort to amend state constitution

Steve Marcus / FILE

A cable shovel dumps gold ore into a truck in Crescent Valley in September 2001. In Nevada, mining companies get a slew of tax deductions, including for equipment depreciation.

By J. Patrick Coolican (contact)

Friday, May 15, 2009 | 2 a.m.

Lawmakers talk revenue: Business tax plan gets hearing (5-14-2009)
Buckley pitches new tax plan to bridge revenue gap (5-14-2009)
Legislators settle on spending plan (5-12-2009)
Mining law reform considered in House (2-26-09)
Mining industry asked to pre-pay tax in budget deal (12-4-08)
Mining’s boom does little for Nevada’s bottom line (9-7-08)

Archive of Sun politics stories

Politics: The Early Line

Nevada Mining Association

Taxes in Order?

Carson City — A liberal interest group is threatening to go to voters in 2010 to amend the state constitution to increase the tax on mining operations.

In a letter to the board of the Progressive Leadership Alliance of Nevada, Bob Fulkerson, the state director, said there are “ominous signs that legislators will refrain from closing mining tax loopholes in any significant way ...”

“I am writing to gauge your support for going directly to the people,” he writes.

Mining lobbyists have effectively thwarted plans this legislative session to use the industry to help fill the state’s nearly $3 billion budget hole.

Mining is enjoying boom times as investors, nervous about stock and bond markets, have flocked to gold, driving the price to more than $900 an ounce.

Nevada Mining Association President Tim Crowley could not be reached late Thursday for comment.

Mining, which is employing more than two dozen lobbyists here, argues that single-industry taxation is bad policy, an assertion echoed by many economists.

Crowley testified Thursday in favor of a bill to raise the modified business tax, which is a payroll tax, and he has said repeatedly that the industry is more than willing to contribute to fixing the state’s fiscal crisis, but only if the solution is broad-based and not industry-specific.

Industry leaders have said they offer good jobs with good wages and benefits in rural areas that would otherwise face economic hardship. They have also noted they pay sales and property taxes, in addition to the mining tax.

Fulkerson argues that the industry is getting a free ride.

In 2007 the state set a record with $5.4 billion in commodities extracted, according to the state Minerals Division. With the tax rate on mining capped at 5 percent, the state received $38 million and counties $37 million, according to Minerals Division records.

The tax on car rentals, by comparison, gave the state nearly $30 million in the past fiscal year.

Nevada is the largest gold producer in the United States, and trails only China, South Africa and Australia worldwide.

While most states tax mining based on gross value, Nevada’s mining companies can deduct a slew of expenses, including equipment depreciation, ore transport and minerals marketing. After the deductions, Nevada mining companies reported net proceeds of $1.5 billion in 2007, up from $853 million in 2005.

In his letter, obtained Thursday by the Sun, Fulkerson reviews a range of potential options for voters.

“We could consider an amendment to strike the word ‘net’ and change 5 percent to a higher number. Another, even simpler solution might be to just eliminate the mining tax section from the state constitution altogether,” the letter reads.

That section of the constitution caps the extraction tax at 5 percent.

Fulkerson also notes, correctly, that most of the state’s voters live in Southern Nevada. He asserts they could be convinced that the mining companies, whose operations are mostly in the rural north, are not paying their fair share.

An electoral assault on a single industry has a recent antecedent, as the teachers union, disappointed by the Legislature’s failure to enact bigger pay raises and more money for education in 2007, threatened to go to the ballot with a gaming tax increase. That eventually led to a compromise increase in the hotel room tax, passed this session.

A ballot question, which would have to pass in two elections to become part of the state constitution, could wind up as an expensive war between the populist PLAN and a well-funded industry. It could also create thorny questions for candidates such as Sen. Harry Reid, the Democratic Majority Leader and longtime supporter of the industry, who would have to take a position.

Discussion: 14 comments so far…

By Harley

5/15/09 at 2:26 a.m.

Suggest removal

A referendum should be petitioned to have these tax-n-spend liberals and their interests groups criminalized.

Stop theft, criminalize taxation!
By LVPaco

5/15/09 at 5:50 a.m.

Suggest removal

It would be my pleasure to vote YES to tax the mining industry. After what I witnessed in Northern Nevada and the absolute destruction that the mining industry has caused all in the search for "eldorado." The mining industry has never paid its fair share NEVER...

It should also be noted that most mining companies in Nevada are not even American companies...
By gmag39

5/15/09 at 5:50 a.m.

Suggest removal

Harley,
How thought provoking!
You have a deft touch with the enlish language.
By Galfromvegas

5/15/09 at 6:04 a.m.

Suggest removal

I will personally contribute time and money to this effort. I can 't understand why the gamblers are not on board with this--maybe because they have the same lobbyists as mining. The remind me of the royal marriages of Europe that resulted in deformed offspring--our public policies are so mangled and ugly because they come from incestuous interests.
By Jim24681

5/15/09 at 6:58 a.m.

Suggest removal

What makes Mining especially bad, is they'll whine and complain about getting their taxes raised, but they are the FIRST to point the finger at others (gross receipts) to have their taxes raised.

Gaming is similar, but at least they
1. Pay/Collect a ton in taxes. Between the gaming tax, the room tax, the Live Entertainment tax, and the sales tax they collect at their restaurants/outlets, they pay about 50% of the state general fun. Also, they employ a ton of people with good paying jobs and good benefits, so that trickles down to tax revenue and economic growth in the rest of the economy.

Mining pays almost nothing in taxes given its revenues and profits, and employs a paltry amount of employees (12.5k) compared to pretty much every industry, so it's not like their money is trickling down to other segments of the economy. http://www.bls.gov/eag/eag.nv.htm
By neiman1

5/15/09 at 7:07 a.m.

Suggest removal

When you want less of something, tax it. Raising taxes on mining and employers is the best way to reduce government revenues by sending more people to the unemployment office.
By ksand99

5/15/09 at 8:30 a.m.

Suggest removal

Dear Mr. Fulkerson,

Don't bother with the threat, just make this happen. Mining does not pay their fair share.

Take Gypsum, for example.

In 2007, gross proceeds of gypsum mines in Nevada were $14,971,988.

How much did they pay in taxes?

$46.98.

Less than fifty bucks on almost 15 million dollars worth of gross proceeds. That's ridiculous.

In 2007, the gross proceeds of minerals in the state of Nevada was $5,157,136,841.

Mining companies, state-wide paid an effective tax rate of 1.5%.

It's time mining contribute to our state.
By ths

5/15/09 at 8:41 a.m.

Suggest removal

I will support this. It is sad when the car rental revenue almost pays as much tax as the mining industry does.

Regarding those who threat that more people will go to unemployement look at other states. We are at the bottom three in taxes nation wide as a state, but have one of the highest unemployements as a state in the country.

I relate this to that we don't support our schools, transportation and public safety enough. CEO's and owners of companies don't want to move here if they can't send their children to school, or find educated employees to hire.

The posting on here that are short sited saying additional taxes will create more unemployement has never been proven in a study. It has been proven that Nevada low business tax can't create the large wave of employers moving to this state that everyone who says keep taxes low wants to believe.
By That_Anonymous_Guy

5/15/09 at 9:27 a.m.

Suggest removal

Raising the mining tax would be utter insanity. If we did that, the mining companies would use their super-secret transporter rays to instantly remove all of Nevada's gold, silver and other minerals, rematerializing them in another state with far lower mining taxes.

Of course, that would require them to actually find a state that has lower effective mining taxes than Nevada.
By Judy

5/15/09 at 9:35 a.m.

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How can I help?
By Launce

5/15/09 at 10:10 a.m.

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TAG -- Ha! Best. Comment. Ever.
The outpouring of support for PLAN's position is really great.
By The_Onion

5/15/09 at 11:47 a.m.

Suggest removal

I for one will move my mine out of state if the voters of NV try to tax me so the state can pay for education and essential services.

Does anyone have a truck and shovel that I can borrow?

Seriously though, Harry Reid doesn't have to weigh in on this at all b/c it's a state tax, not a federal issue. HR will need to weigh on 1872 and federal royalties, but not this. So politically speaking, this issue will come down between the mining industry and the voters of Nevada.

I wonder who will win?
By jpcoolican

5/15/09 at 12:02 p.m.

Suggest removal

Trust me: I'm going to be asking Sen. Reid what he intends to do in the voting booth if this makes it to the ballot.
By marianevans

5/15/09 at 1:05 p.m.

Suggest removal

The views of Reidian offspring seeking higher office will also be newsworthy. Fun for the whole family!