Governor open to reducing mining tax deductions, spokesman says

Gov. Jim Gibbons would consider reducing the number of tax deductions available to the mining industry to help close a state budget shortfall estimated at $871 million, a spokesman said Monday.

"The governor is certainly open to adjusting the deductions that mining gets to take," said Gibbons spokesman Dan Burns. The administration calculates that eliminating some mining tax deductions could bring in an estimated $25 million annually.

Such a proposal would not violate the governor's pledge to balance the budget without raising taxes, Burns said.

"If you remove deductions, that is not a tax increase."

The mining deduction question is not, however, included in the governor's evolving agenda for the upcoming special session of the Legislature.

But Burns said, "Any item can be added by amendment at any time very, very quickly."

Limits on taxing mining are included in the state's constitution dating to 1865. The tax advantage has been the target of citizens frustrated with cuts to state services, but the industry has succeeded in beating back proposals for change.

Still, leading Democrats, who have bemoaned proposed cuts to education and health and social services, declined to comment on the governor's suggestion.

Dave Berns, spokesman for Senate Majority Leader Steven Horsford, D-Las Vegas, said Horsford was unavailable to comment on the issue of mining tax deductions Monday evening.

Assembly Speaker Barbara Buckley, D-Las Vegas, did not return a call for comment.

Both Buckley and Horsford have said they oppose raising taxes in the special session.

Tim Crowley, president of the Nevada Mining Association, said that before Monday, he had not heard any talk from the governor regarding the possibility of restricting deductions.

"We've never discussed this as far as I know," Crowley said. "My first step is to verify the governor's intentions."

To increase the tax rate on net proceeds from mining would take a constitutional amendment. But the Legislature and governor have the power to reduce the deductions mining companies use to reduce their tax burden.

Marketing is an expense that mining companies can deduct to reduce the net proceeds on which they are taxed.

Beyond marketing, it was unclear what deductions the Gibbons administration examined to arrive at the $25 million figure.

Other proposals to extract more money from the mining industry have included asking it to pre-pay taxes, as it did for 2009, but Horsford said that he opposes the proposal because such a move merely would add to future budget shortfalls.

Crowley said the mining industry is open to the possibility of increases in the amounts of fees it pays to government agencies such as the Nevada Division of Environmental Protection and the Nevada Commission on Mineral Resources.

But he characterized the deductions as crucial to fairly taxing mining on the value of its property.

"Tax the value of the mineral, not the expense to get it to a commercial user," the Nevada Mining Association said on its Web site.

Such talk about mining taxes is going on at the same time that a petition is being circulated by the Progressive Leadership Alliance of Nevada.

The group is seeking a constitutional amendment to increase the mining tax rate and charge taxes against gross proceeds, as opposed to the current net proceeds tax.

Such an amendment would require a vote by the people in 2010 and again in 2012 and could not go into effect until at least 2013.

The Nevada Mining Association has filed a lawsuit to stop the petition.

Contact reporter Benjamin Spillman at bspillman@reviewjournal.com or 702-477-3861.