Alliance might push petition to increase taxes on mining

Frustrated by the lack of action in the Legislature to make the mining industry pay more in taxes, the Progressive Leadership Alliance of Nevada said today it might circulate a ballot initiative to take away the industry's constitutional protection.

For months, the liberal coalition has been calling for legislators to eliminate some of the deductions that allow the mining companies to reduce their tax burden.

The Nevada Constitution levies a net proceeds of minerals tax of 5 percent, but PLAN contends the effective rate is much lower because of all those deductions.

The industry argues that the tax is meant to be a net, not a gross, and the deductions allow the companies to account for the high cost of doing business.

The status of the mining tax proposal is unclear as the Legislature enters its final days of budget talks.

It's believed to be politically popular in the Democrat-controlled Senate and Assembly. But the proposed change wouldn't bring in enough money to make much difference to the current budget discussion, and the industry has hired a bevy of savvy lobbyists.

Here's today's letter from PLAN's Bob Fulkerson explaining the ballot initiative threat:

TO: PLAN Board of Directors and Allies

FR: Bob Fulkerson, State Director

RE: Potential Mining Tax Ballot Initiative

As you are probably aware, there are some ominous signs that legislators will refrain from closing mining tax loopholes in any significant way, and perhaps not at all.

I am writing to gauge your support for going directly to the people with a constitutional amendment in 2010, if mining indeed escapes taxation this session.

We could consider an amendment to strike the word "net" and change 5% to a higher number. Another, even simpler solution might be to just eliminate the mining tax section from the state constitution altogether.

If we work for a constitutional amendment, we can be sure of two things: a) The majority of the people of Nevada live in the South, and they are not at all sympathetic to the mining industry; and b) The cost to the mining industry will be far, far higher in the long and short run than the removal of some of the existing deductions.

As we've been pointing out for the past year, the mining industry has manipulated a sweetheart deal tax system of deductions and loopholes so well, that sometimes mines can produce hundreds of millions of dollars worth of gold, yet completely eliminate their tax burden on that production. And when the gold is gone, it's gone, along with the mining companies and Nevada's tax revenue. Maybe constitutional protection of this industry made sense during the gold rush, but it cannot be justified any longer.

Please explore the interest of your organization in broadening the tax base to include mining in the event our legislature fails to act.

Thank you!