Mining industry has always gotten free ride on taxes

Victor, writing for Hubert Bancroft’s “History of Nevada, 1540-1888,” was contemptuous of the silver mining industry’s contributions.

“What advantage to Nevada has been her mountain of Silver? What advantage her organization as a state? Some, no doubt, but more to individuals than to the commonwealth at large,” Victor wrote more than 120 years ago.

She said millions of dollars worth of silver had been taken, “leaving hills of debris and ghastly holes in the ground — money squandered by lucky gamblers in New York and Paris, and used for purposes of political bribery and social corruption in Virginia City and San Francisco. Less than the least of the tailings of all this vast output of wealth has gone to benefit Nevada.”

I had to look up tailings to understand the full insult, but the historian was referring to leftover refuse after processing.

Victor was writing not long after Nevada’s Constitution had been delayed because the mining barons didn’t like it. They wanted special protection from taxation. And they got it. The mining industry finagled a sweetheart deal capping the tax rate on the net proceeds of mines. Later, the mining companies were allowed to deduct expenses of extracting the ore, which lowered their tax burden even further.

Only once has the mining industry seen an increase in taxes it pays directly — that was in 1989.

In 1987, the late Assemblyman Marvin Sedway insisted loudly and profanely that mining wasn’t paying its fair share. He forced the industry to support a change in the state Constitution allowing an increase in the tax rate.

Here’s some numbers to ponder: In 2009, some $5.8 billion worth of minerals, now mostly gold, came out of Nevada mines. The generous deductions for the extraction costs totaled $4 billion. So on the taxable $1.8 billion, the industry paid $94 million, half to the state, half to the counties where the ore was mined. That’s a big number but less than 2 percent of the gross before deductions.

Large gaming operations pay 6.75 percent on gross gaming revenues.

Mining lobbyists have long insisted they pay plenty of other taxes too, so the relatively light burden of the net proceeds tax on mining shouldn’t be viewed in a vacuum. This year, the industry is projected to pay $140 million on net proceeds taxes and another $100 million in sales taxes.

Since 1989, no effort to raise taxes on mining has succeeded. The Progressive Leadership Alliance of Nevada tried, but failed last year.

It won’t succeed this year either. Gov. Brian Sandoval won’t allow it.

Assemblywoman Peggy Pierce, D-Las Vegas, won’t see her bill reducing the deductions mining takes by 60 percent become law this year. The political reality is that Assembly Bill 428 is going nowhere fast. But it drew attention to the problem.

The mining industry opposed that bill. But perhaps foreseeing the inevitable future, the industry is neutral on Senate Joint Resolution 15. It takes five years to change the constitution, but it would remove the constitutional limitations on taxing mining and let the Legislature decide how to tax mining.

Gold is selling at around $1,480 an ounce, and an estimated 75 million ounces are left in Nevada’s ground. It’s not a business in a heap of hurt right now.

Mining lobbyists insist mining isn’t reluctant to pay more in taxes. But the industry wants a broad-based tax, not a mining specific tax.

Frankly, a broad-based business tax or a corporate income tax has as much chance of becoming law this year as I have snagging a date with Sean Connery.

Jane Ann Morrison’s column appears Monday, Thursday and Saturday. E-mail her at Jane@reviewjournal.com or call 702- 383-0275. She also blogs at lvrj.com/blogs/morrison.