State needs mining industry’s help

With the state in its biggest fiscal bind in the modern era, the ultra-flush mining industry can and should be part of the solution. A big part.

The facts are these:

• Gold prices stand at more than $940 per ounce, and analysts do not expect them to drop anytime soon.

• Nevada produces 80 percent of the gold in the United States.

• Nevada’s mines generated $5.4 billion in revenue in 2007.

• In that same year, the industry paid $34.7 million in taxes to the state, representing about 1 percent of the state’s total tax revenue.

See a problem here? I sure do. The mining companies are not paying sufficiently for the privilege of digging up our state and extracting our precious minerals.

The Nevada Legislature is considering ways of tapping the mining industry to help offset a massive state budget deficit. A big roadblock is that the mining tax — 5 percent of net revenues — is written into the Nevada Constitution. Changing the tax rate would require legislative approval in two consecutive sessions as well as voter approval in 2012.

Despite the long process, this absolutely should be done. It’s increasingly clear that the global recession is not going to disappear in a few months, and it may take a couple of years to get back to a sense of economic normalcy. An increase in the state mining tax taking effect in 2012 could help greatly.

In the meantime, the state is pondering ways to generate mining tax revenue right away. The best idea seems to be to cut or eliminate “deductions” that the miners currently enjoy before their tax payments are tallied. This could raise $141 million.

Not surprisingly, the mining industry doesn’t like the sound of this. It contends that increasing its tax burden to that extent would, as Nevada Mining Association President Tim Crowley claims, “put us out of business.” He says the mining companies would have to “look elsewhere” instead of going after the gold deposits in Nevada.

This is absurd — fear-mongering of the most cynical sort. It’s not serious, in my view, and it’s counterproductive. The mining companies are here because this is where the gold is. They also are here because they are able to extract the gold relatively cheaply, paying low taxes and sending billions in profits out of state. They have been taking advantage of Nevada for longer than the state has existed, and we’ve let it happen.

Crowley is right about one thing: Mining is a boom-and-bust business. It may come to pass that Nevada’s gold deposits will play out or the price of gold will plummet for some reason, and then the state won’t get much tax revenue from the mines at all.

That’s something for state lawmakers to worry about, but it can’t possibly be a major concern of the mining companies. Because when the gold is gone, so are they.