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April 20, 2015

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Memo from Carson City:

Lawmakers preparing for mining tax fight

The biggest legislative battle next year might not be over school spending, public employees’ bargaining rights or even the never-ending struggle over taxes, at least the usual kinds of taxes. The most contested issue, many legislative observers believe, will be a proposal that would eventually remove the industry-specific mining tax from the constitution.

Senate Joint Resolution 15, or SJR15, passed the 2011 session and will have to pass in 2013 to go before voters in 2014.

Why so controversial?

The state constitution, ratified in the 19th century, provides that mines and minerals can only be taxed as outlined in the document. It was amended in 1989 to set the net proceeds tax — after deductions — at 5 percent.

The mining industry wants to keep its tax in the constitution. And who wouldn’t? It’s a very high barrier — a five-year fight — to any change to the tax.

For liberals seeking higher taxes next session, SJR15 might be the best they can do.

“We’re going to go to the mat on this,” said Bob Fulkerson, executive director of the Progressive Leadership Alliance of Nevada, a liberal umbrella group.

But Fulkerson is worried the politics of initiative petitions might kill the coalition that got SJR15 passed in 2011.

Click to enlarge photo

Tim Crowley

The state’s AFL-CIO, Nevada’s largest labor organization, and teachers union are supporting an initiative to institute a business margins tax. Gaming, so far, hasn’t decided whether to support it. Mining, the other ally of a broad business tax, is also waiting.

The fear is this: Mining will support the initiative only if labor, and Democrats, pull their support for SJR15.

Tim Crowley, president of the Nevada Mining Association, said he has not had any such discussions. Asked if SJR15 will be a major fight, he said, “We’ll address it when we get to the 2013 Legislature.”

Mining is also being targeted with an initiative. Monte Miller, a conservative businessman who has opposed taxes, is proposing a constitutional amendment that would raise the mining tax-cap to 9 percent.

Fulkerson said he has not yet met with Miller, and it’s unclear what would happen if both constitutional initiatives passed — Miller’s proposal requires two votes of the people, in 2012 and 2014. Regardless, Fulkerson said, Miller’s initiative “highlights the fact that mining needs to pony up. It puts mining in the public eye.”

Click to enlarge photo

Tick Segerblom

Mining argues against industry-specific taxes by saying it would further narrow the tax base that funds public education and government services. Eliminating the net proceeds on minerals tax “would be harmful to the counties that rely on net proceeds and the state which gets 50 percent of the money,” he said. “This is not the time to roll back the tax on the mining industry.”

Fulkerson, though, said the state should replace it with a severance tax, like other states have.

Assemblyman Tick Segerblom said removing the mining tax from the constitution would level the playing field.

Click to enlarge photo

Sen. Michael Roberson

“Right now, we have hotels and business, but we don’t have mining as something we could look at,” he said.

Another layer of intrigue is the position of Republican lawmakers on mining. Barrick, the state’s largest mining company, has donated $30,000 to the Keystone Corp. business group, which opposes all tax increases. Business groups in general have also favored Republicans in their political donations, hoping control of the state Senate switches from Democrats to Republicans.

Sen. Ben Kieckhefer, R-Reno, who voted for SJR15 in 2011, said, “I’ll review it again when it comes back in ’13, but at this point no one has told me why I should change my mind.”

Sen. Michael Roberson, R-Las Vegas, who is in position to be the Republican leader in 2013, said he, too, still supports SJR15. Taxes “should not be based on protections in the state constitution from 100 years ago,” he said.

Not that he supports raising mining’s tax, but lawmakers should have the option, he said.

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  1. It is obscene that mining receives special constitutional protection apart from all others. It makes a mockery of equal justice for all.

  2. I am putting forward Tanker1975's Comment, as it provides valueable information on which to base a decision for readers:
    "In 2009, the mining industry had gross revenue of 5.8 BILLION. After deductions, including some that may have not complied with state law, the net profit was 1.8 BILLION. The tax paid to the state of Nevada was 48.6 MILLION.

    The state of Alaska collects a royalty of 25% on oil. Alaska currently has a 3 BILLION surplus in the state budget, and Exxon just reported record 1st quarter profits of over 10 BILLION, so the royalty payment doesn't seem to be causing the oil companies financial problems.

    The Barrack annual report has just been published, and shows record profits and dividends above the record levels of 2009. This is a link to the report, you may want to look closely at pages 2, 3, and 4. Net earnings and profits have jumped dramatically between 2009 and 2010. Shareholders return on investment jumped from 12% in 2009 to 19% in 2010.
    In 2010, the Cortez Hill mine in Nevada produced 1.14 MILLION ounces (31.6 TONS) of gold at a cost of $312 per ounce. In the first quarter of 2011, the mine produced 366000 ounces (11.4
    TONS) at a cost of $220 per ounce.

    Nevada is the SECOND largest producer of gold in the world. Assuming a profit of $1000 per ounce, that amounts to a profit from one mine of $366,000,000 for one quarter. That amounts to a profit of $1,464,000,000 if production for each quarter remains the same. Of that profit, Nevada will see between $10,000,000 amd $20,000,000 based on current rates. Of course mining pays its fair share, NOT!!!!!!!!"

  3. Mining has enjoyed taking the wealth within the ground from Nevada for over a century, based on the Nevada Constitution, which Mining had written in laws specific for their own industry. These MINING LAWS have virtually gone unchallenged due to the population base that existed who were beholden (and perhaps less educated with less opportunities)over time. But times have changed, and shifts in population have most certainly changed. Nevada now has a diverse population, most educated through high school, skilled, and now numbering in the millions of people. There are more types of industries and workforces to match them.

    MINING no longer has the influence that it once did. Most of the current MINING owners, if not all, are foreigners or out of state owners. They could care less about the People of Nevada. It is all about PROFITS $$$ for them. Once the wealth in the form of rare earths and minerals are gone, that's it. Nevada receives a pittance in return, and is left with the void when MINING leaves.

    All the People of Nevada are asking, is for MINING to pay their fair share. Even if they give an average of taxes they pay in the other 49 states, it would be more than what they pay NOW. Nevada receives the lowest amount in tax revenue from MINING and they wish for that to continue.

    Nevada's infrastructure is economically bleeding, and if mining is UNWILLING to pay their fair share, maybe the STATE needs to take over all MINING in Nevada! You can bet the permits will take less time, and Nevadans will get hired first over outsiders. The wealth will remain in the STATE.(I realize this is a wild/extreme proposal)

    The People of Nevada cannot continue the path taken for over a century. The time is now, to effectively change the Nevada Constitution regarding revenues generated from MINING. It is only fair!

    Blessings and Peace,

  4. Mining has always told Nevada what they would pay...

    "here's what your getting this year".
    And in large part, NO ONE even was tasked with checking the math.

    The antiquated Nevada notion that 'taxes are all inherently evil' is propagated by the very folks that make a killin' off of Nevada yet refuse to support the state that provides them their golden eggs.

    Gambling & Mining interests run Nevada.
    Until 'the people' run Nevada, you will get what they decide to give you. Not a penny more.

    The Nevada Mining & Gaming lobbies are slicker than a babbies butt, and smell about the same.
    But give them their due; They are extraordinarily successful.

  5. I would raise their taxes to 30%. Currently they are Stealing a Non-Renewable resource from Nevadans. They should feel free to go elsewhere for if we Bank our Minerals they will only go up in price over the decades. Gaming, while it should be taxed at least 20% (half the Macau Rate) does not deplete our Natural resources, however it does little to nothing to provide a better future to Nevadans. If Both Sides (Nevadans AND the Businesses) do not benefit from their presence in Nevada - we should be able to live without them.

  6. The mining fight is not new.

    Mining has always set the agenda for it's taxation. Mining will always throw massive amounts of money and free food and lots of drinks at politicians and campaigns.

    We need to keep score of who supports mining, up in Carson, and get them thrown out in the next election. Both parties are guilty of making International mining companies pocket books more important than the tax base of the state.

    The minerals are HERE and not on Broadway in NYC. Miners won't be leaving lucrative gold mines because of a slightly higher mining tax.

    If you want to see mining's history go to the countryside around Carson City, the Comstock, and Virginia City to see what was left by miners. 120 or so years ago they took the minerals for money and left poisoned streams, ghost towns and a broken countryside.

    Many of the hills you pass from Reno to Carson USED to have trees on them until the miners needed them for charcoal. The charcoal was made from the roots and trunks and branches of entire forests that the miners deliberately destroyed.