New plan to tax mining industry an uphill battle

It's one of the clearest proposals yet to raise money for Nevada's dirt-poor state government, but so far the initiative to raise taxes on the booming mining industry isn't getting much traction with the state's political establishment.

Backers of the mining tax initiative -- primarily the Progressive Leadership Alliance of Nevada, or PLAN -- say that's because mining is Nevada's most politically entrenched industry and wants to bury the petition before it gains momentum with the public.

The industry, which employs a lobbyist for every three legislators, already filed suit Tuesday to block the petition and PLAN's leaders say their traditional allies in the Democratic Party are under intense pressure to disavow the mining tax movement.

"None of them have really jumped off the cliff with us," said Bob Fulkerson, state director for PLAN, of the group's traditional allies in labor and politics. "People know if they cross the mining corporations they are putting their livelihoods in jeopardy."

The Nevada Mining Association is a powerful voice in the Silver State. Its members donate thousands of dollars to campaigns for Democrats and Republicans throughout Nevada. The association employs R&R Partners, a marketing and lobbying firm run by Billy Vassiliadis and Pete Ernaut, the state's most powerful Democratic and Republican consultants, respectively.

R&R also represents the state's biggest electricity provider, NV Energy, and the Las Vegas Convention and Visitors Authority, a coalition of the biggest gambling resort companies and local governments in Nevada.

The connections mean mining's political network taps just about every major source of money and influence in the state and could make it difficult for politicians who might be inclined to ally with PLAN to raise cash through traditional outlets.

"Unfortunately money runs the campaigns and (legislators) are put in a very awkward position," said PLAN lobbyist Jan Gilbert.

Senate Majority Leader Steven Horsford, D-Las Vegas, wouldn't comment on the PLAN initiative. Senate Minority Leader Bill Raggio, R-Reno, said he doesn't support making policy through the initiative process.

Horsford said a pending tax study will consider how mining and other industries could pay more to the state and that the Legislature can use that for guidance.

Assembly Speaker Barbara Buckley, D-Las Vegas, didn't return calls on the subject.

In 2008 when Buckley held a series of town hall meetings around the state many residents suggested higher mining taxes as a solution to the state's budget woes, but such a plan died in the 2009 legislative session.

Assemblywoman Debbie Smith, D-Sparks, said she understands PLAN's frustration but doesn't support raising taxes with a voter initiative.

"They have wanted to see change and feel that there is a support out there for the change. But I still think that taxing by initiative isn't a good idea," she said.

Smith also acknowledged PLAN put legislators, particularly Democrats, in a tough position with the initiative.

"It's OK," Smith said. "We're used to being put in these awkward situations and in the middle of opposing viewpoints."

D. Taylor, secretary-treasurer of the influential Culinary Union Local 226 in Las Vegas said the group hasn't yet formed an opinion, although Taylor was quoted Wednesday in the Las Vegas Sun chiding the Democratic-controlled Legislature for being fearful of raising taxes to maintain state services.

"I think the Democrats in this state need to decide what they stand for. They have to stand for something and they have to pay for it if they want something different," Taylor was quoted as saying.

Lynn Warne, president of the Nevada State Education Association, said the teachers union hasn't formed an official opinion.

But she volunteered her personal opinion on the subject.

"I think it is a great idea," Warne said. "Mining has to pay its fair share. They pay little to nothing for the schools in this state."

Reluctance by many to run afoul of powerful mining interests isn't the only obstacle PLAN faces rallying sympathizers.

The petition could also raise taxes on geothermal energy producers, an outcome considered undesirable across the entire political spectrum.

That's because geothermal energy is covered under the same tax laws as mining.

One energy lobbyist asked not to be named said if the initiative passes it would "probably crush the geothermal industry."

The paradox facing Democrats who say the state needs long term "revenue reform" is that higher taxes on a constituency like mining, an unpopular business with many on the left, could harm producers of geothermal energy, an ascendant form of alternative energy, a pet issue for progressives.

"It is an awkward situation all around," the lobbyist said.

Despite resistance, PLAN is moving forward with the effort to allow voters to decide whether to raise mining taxes.

They're betting the public's desire to undo cuts to state services such as education, prisons and social services will overcome pressure from the Nevada Mining Association and its allies to preserve the status quo, or at least minimize mining's share of the tax burden.

The initiative, launched Jan. 19, wouldn't do anything to help the state dig itself out from a short-term budget shortfall of $881 million. That deficit will be the subject of a special session of the Legislature scheduled to begin Feb. 23.

If the activists overcome mining's legal challenges it would go on the ballot in November and, if it passes, appear on the ballot again in 2012. The earliest it could go into effect would be 2013.

"The mining folks will lawyer up and do everything to keep it off the ballot," Republican strategist Ryan Erwin said. "Traditionally voters are willing to tax people other than themselves."

PLAN's initiative would address the state's long-term finances by changing the "net proceeds of minerals" tax, a system that's been part of the state's constitution since 1865.

If the initiative were to pass it would change the state constitution by replacing the word "net" with "gross", which would prevent mining operators from deducting expenses before calculating the tax they owe on the value of minerals they extract. The petition also seeks to change the description of the tax rate from "not to exceed" to "not less than" 5 percent.

PLAN says proceeds from gold totaled $25.5 billion from 2000 to 2007 and mining companies paid $125.3 million in taxes to the general fund, for a rate of one-half of 1 percent. In contrast, PLAN says the poorest 20 percent of Nevadans pay 8.3 percent of their income in taxes.

"We have educated the public of how much the mining industry has paid in the net proceeds of minerals," said Gilbert. "It is startlingly low."

If the initiative passes, PLAN said it would raise as much as $250 million annually that could be spent on schools, social services and health care.

The Nevada Mining Association says the bill threatens to undermine one of the few industries in the state that is still successful.

In a legal filing in District Court in Carson City the association said the initiative's wording violates "single issue" restrictions for petitions by calling for changes to the method and rate by which mining is taxed.

The association also argues PLAN is unfairly singling out mining to carry the state's tax burden and ignoring the cost of buying equipment, hiring employees and other big expenses associated with getting minerals out of the ground.

"Ignoring these necessary costs in determining the value of mineral proceeds artificially increases the assessment of the value of all minerals beyond their fair market value," the filing stated.

Outside the court filing, the association is quick to remind voters and policy makers the industry pays sales, property and modified business taxes in addition to the net proceeds levy.

According to the Nevada Mining Association, miners in 2007 paid $123 million in taxes on top of the industry-specific net proceeds tax.

With gold trading at more than $1,000 an ounce, mining association president Tim Crowley said the industry is unfairly and inaccurately seen as a potential savior for the state's budget woes.

"The precious metals industry is profiting right now and everybody knows it. It makes us a very attractive target," Crowley said.

The association also reminds people that miners agreed to pre-pay 2009 taxes to help the state and is open to discussions about fees and proposals that could extract more money from mining, so long as other businesses share the pain.

"We have said we are open to considering prepayment of taxes, we are open to paying additional fees as long as those are broad based and not being singled out," Crowley said.

But the mining industry's arguments aren't likely to resonate with an electorate full of angst over a bad economy and drastic cuts to popular state services, according to some political consultants.

That's why the industry will continue to fight hard to make sure the taxation issue never makes it in front of voters, said Democratic consultant Ronni Council.

"If it ever goes to voters, the voters will vote for a tax," Council said. "Nevada needs to diversify (its) revenue, and that seems like the best way at this point."

Whether PLAN can give voters the chance is another story, she said.

"There are going to be a lot of people who are pressured to not help fund this," Council said. "The traditional folks here in Nevada who donate money to things aren't going to do it."

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