John L. Smith On The Newest Effort To Change Nevada's Mining Taxes
The Nevada Legislature has begun grinding away under COVID-19 precautions in Carson City.
And state residents reeling from the coronavirus pandemic are probably a little more interested in what lawmakers accomplish over the 120 days
One area that has long intrigued progressives is the tax advantage enjoyed by Nevada's mining industry. Those protections were built into the state constitution in 1864, and they include a 5 percent tax on mining proceeds. That is the law of the land. The industry also enjoys a long list of deductions.
State of Nevada contributor John L. Smith has followed the saga of mining in Nevada for many years.
“When we talk about mining in Nevada, we’re essentially talking about gold mining in Nevada," he said, "We’re not talking about a guy with a jackass and a pick. We’re talking about major corporations.”
Smith said the mining industry is an enormous extractive industry that is controlled by corporations with a world-wide reach, but it also employs thousands of Nevadans.
In addition, it acts a "lifeblood" to many rural communities.
The problem for a lot of progressives in the state is the relatively light tax burden the industry enjoys.
“In 2019, more than $7.5 billion was generated out of mining and that sounds like a real windfall potentially for the state," Smith said, "That is not how it pencils out after you start to take away or use the deductions that they enjoy.”
The deductions remove $5.3 billion from their tax bill, meaning they only pay taxes on $2.3 billion. However, that is when the tax cap, which is enshrined in the state constitution, kicks in. It is a 5 percent net proceeds cap, which shrinks the bill again to about $122 million.
Smith explained that actually gets split one more time. Half of that $122 million, or about $61 million in 2019, goes to the state and the other half goes to the counties where the mines are located.
“Eureka County, which has very few people living in it, actually gets a pretty powerful benefit from that mining tax for the state," he said, "Taking nothing away from the folks up north, but that’s really how that pie gets whittled and there’s not a whole lot left to feed things like public education and pubic safety and things like that."
With an arrangement like that, it is easy to see why many rural counties wouldn't want to change it. And of course, mining companies don't want to see any changes.
“Mining sits out there protected by the constitution and by a traditionally, really quite powerful lobby,” Smith said.
Over the weekend, Smith listened in on a virtual conference by progressives who are backing three resolutions in the Legislature that might actually change the mining tax structure.
“This is an interesting political moment for Nevada,” he said.
Besides the fact that Democrats hold the majority in the State Senate, the State Assembly and the governor is a democrat, Smith believes leaders of the state's progressive organizations and groups aren't statisfied with winning.
“They’re not going to be content with just being on the winning side. They plan to steer policy and are pushing that at an energetic level,” he said.
There is no question the state is facing major budget problems this year because of the economic downturn associated with the coronavirus pandemic. Smith said this push for mining tax reform isn't about filling that gap.
“When you hear them talk, they are also talking about these changes actually wouldn’t help Nevada in the short-term," he said, "Essentially, wouldn’t do much with our current budget crisis. It’s that long-term planning. If you’re going to change the level that we fund education at, for instance, it is going to take fuel and there are only so many sources of it.”
The three resolutions have passed but need to be taken up again by the Legislature. Two of the resolutions specifically deal with the tax cap in the constitution, changing it from net proceeds to gross proceeds, Smith said.
“Those numbers would generate up to a half a billion dollars a year under the current gold standard and gold is booming right now. It certainly something to consider."
Of course, mining does not want that change. Smith said Southern Nevada's should be prepared to see more ads touting the benefits of the mining industry in Nevada while lawmakers debate the issue in Carson City.
But could the industry actually leave the state?
“The joke is, of course, if you don’t like it, go somewhere else and mine gold,” Smith quipped.
There are only a few places in the world where gold mining can happen and Northern Nevada happens to be a place with "vast trove of microscope gold," he said.
“It’s hard to image that with gold at $2,000 or $1,800 an ounce that they’re going to go anywhere because this is fat times for gold mining up north,” he said.
In addition to who holds the power in Carson City, getting a boost in funding is intriguing for lawmakers staring down deep cuts to education both K through 12 and higher ed, among other expected cuts to other programs, Smith said.
“One: many of the legislators are in the south where mining doesn’t have quite the impact on your political career, as it might up north. Beyond that, the gaming industry is gutted right now. Revenues are obviously down. Crowd counts are nil, or down substantially, and that’s not going to recover right away.”
Add to that the environmental damage blamed on the industry, there may be enough to actually make a change.
There is another way of going at this that Smith finds interesting:
“There is also another plan that is intriguing to me and that is that the law or constitution could be changed to create a kind of annual payment to Nevada residents much like the way Alaska has its annual oil subsidy to folks who live there,” he said.
If the mining industry was seen as being generous by giving each Nevadan a check, it might have fewer critics and a lot more friends in Southern Nevada, he said.
John L. Smith, contributor