PLAN should proceed with mining ballot initiative

The Progressive Leadeship Alliance of Nevada, frustrated by the state Legislature’s reluctance to tap the booming mining industry to help close the state’s budget deficit, is considering a 2010 ballot initiative to get the job done.

This is a fine idea. Nevada’s mining industry enjoys state constitutional protections unlike any other industry. The constitution sets a net proceeds tax of 5 percent, but in reality the rate is much lower because the mining companies enjoy a variety of deductions.

This Legislature could eliminate some of those deductions, generating additional revenue to bring the state budget into balance without gutting education and other public services.

Here’s an excerpt from PLAN’s recent report, “Fool’s Gold: The Silver State’s Tax Structure, Inadequate and Inequitable”:

“• From 2000 through 2007, the mining industry in Nevada extracted and sold
gold worth $25.5 billion, and paid taxes to the state general fund totaling
$125.3 million, an effective gross state tax rate of one-half of 1 percent.

“• Mine owners are allowed to write off expenses as deductions. Over the
last eight years, the Nevada mining industry has deducted 79 percent
of the value of gold production, and paid taxes only on the value of the
remaining 21 percent.

“• In any given year from 2000 through 2007, one-third to one-half of all the
mines operating in the state produced gold worth hundreds of millions of
dollars but reported zero taxable proceeds.

“• Nevada’s two largest gold mines, the Barrick Goldstrike mine and Newmont’s
Carlin Trend project, have reported zero taxable values during years when the
mines have produced gold worth a half-billion dollars or more.

“• While the 5 percent Net Proceeds of Minerals (NPOM) tax rate is written in
the Nevada Constitution and would take years to change, the deductions
by which the mining industry avoids so much taxation are written in
state statutes (NRS 362.120) and can be eliminated through legislation,
raising tens and possibly hundreds of millions of dollars for the state
budget as early as the next biennium.”

The deductions should be reduced or eliminated now, generating more than $100 milion at a time when the state desperately needs it. But a ballot initiative would be even better in the long run. Rather than setting the mining tax rate in the constitution, which dates to the 19th century, it should be crafted by lawmakers and/or voters to reflect modern-day realities.

Changing the state constitution isn’t easy. PLAN and others who join the cause will have to gather thousands of signatures to put a question on the 2010 ballot. Then, if it passes, it would have to pass again in the next election to become law.

Such a question stands a good chance of passage, in no small part because the mining industry does not have much of a constituency in population-rich Southern Nevada.

But it also ought to pass for the simple reason that the gold, silver and other minerals being mined are the property of the people of the state, and we ought to dictate the price that entrepreneurs must pay to dig up our minerals and sell them.