Mining eyed for tax hike via voters

By J. Patrick Coolican

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

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.