No industry is immune from the ebb and flow of the economy, and as a result, no tax is, either.
Take gold. The price of the precious metal has plunged more than 37 percent from its record high of $1,920 per ounce 20 months ago. It has slipped more than $73 over the past two days alone to a three-year low of $1,201.20. That’s bad news for Nevada, the nation’s top gold-producing state and the world’s fourth-largest producer of the resource. It’s also bad news for advocates of higher taxes on the mining industry.
The 2013 Legislature made no substantive changes to the state’s tax structure, save for one: Senate Joint Resolution 15, which would abolish the state constitution’s tax cap on the mining industry. If voters approve the amendment next year, the 2015 Legislature would have the authority to reset the mining tax, currently a maximum of 5 percent of the net proceeds of minerals. It’s a de facto income tax because mining companies are allowed to deduct their expenses, including extraction, processing, marketing and delivery.
The industry was an inviting political target during the depths of the Great Recession because skyrocketing gold prices made mining companies big bucks, while most other Nevada businesses suffered. SJR15 passed both the 2011 and 2013 sessions, setting up next year’s vote and a statewide debate over mining’s tax bill and whether it should change.
This state’s champions for more and higher taxes claim Nevada has long needed a more stable structure that prevents revenues from crashing during economic downturns. It’s an impossible goal. Whether you tax income, sales, gross receipts or property, collections will fluctuate based on market changes and consumer responses to them.
No Nevada industry has been subjected to more booms and busts than mining. If the goal of raising taxes is to “stabilize” the state’s tax base, then mining’s levy won’t help much. From 2000 to 2011, the price of gold shot up more than 500 percent. This year alone, it has lost a quarter of its value.
Last week, Barrick Gold Corp., the world’s largest gold mining company, announced it was eliminating about 40 jobs in Nevada and 100 at its Toronto headquarters in response to falling gold prices. It’s a small reduction, to be sure — Barrick has about 4,500 employees in Nevada — but if gold prices keep tumbling, Nevada can expect less investment and more job losses in the northern part of the state, and less tax revenue for schools and social services.
No one is immune from hard times. No industry can provide Nevada with a sure thing. And no tax can provide governments with forever-predictable levels of revenue. Giving the Legislature the authority to set mining taxes is one issue. Whether those taxes should go up when gold prices are free-falling is another issue entirely. Voters and lawmakers would be wise to remember that next year when debating taxes on mining.