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Senate Republicans propose mining tax as an alternative to margins tax ballot initiative

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Steve Marcus

A cable shovel dumps gold ore into a truck in Crescent Valley in September 2001.

Updated Tuesday, March 5, 2013 | 12:38 p.m.

Nevada Senate Republicans called on the Legislature today to both remove the mining industry’s constitutional tax protections and find a way to increase taxes on the industry as an alternative to the margins tax ballot initiative.

The announcement comes as the Legislature today prepares to hear testimony on the initiative petition supported by the state teachers union to create a margins tax on business revenue.

“The competing measure will ask whether mining should contribute to the state’s education system at a level that more adequately reflects the benefit the industry gains by operating in our state,” said Senate Assistant Minority Leader Ben Kieckhefer, R-Reno.

Calling the margins tax “flawed,” Senate Republicans said in a press release Tuesday morning that Democrats should help Republicans pass Senate Joint Resolution 15, an existing measure to remove the mining industry's tax from the constitution that has already passed the Legislature once. If the Legislature passes it a second time this year, it would go on the 2014 ballot.

“We believe the current discussion relating to broadening the tax base and finding more money for education is important,” said Senate Minority Leader Michael Roberson, R-Henderson. “To that end, we will continue to work with our colleagues on both sides of the aisle to identify sensible structural reforms to Nevada’s revenue system.”

But Roberson will have some work convincing his own caucus to support his proposal.

"I'm not happy," said Sen. Pete Goicoechea, R-Eureka, whose rural Nevada district includes most of the state's largest mining projects.

"I don't believe it's a united caucus," said Sen. James Settelmeyer, R-Gardnerville.

Tim Crowley, of the Nevada Mining Association, said it is "short-sighted" to focus tax increases on a single industry.

"The mining industry has always partnered with the state to help craft fair tax policy that reflects the needs of the state," Crowley said in a written statement. "For more than ten years, the Nevada Mining Association and its members have worked with policy makers to craft broad-based solutions to Nevada’s tax problems. We remain committed to participate in a discussion leading to long-term solutions to the state’s revenue shortfall. The focus on any single industry is short-sighted and misses the larger need to broaden Nevada’s tax base."

Roberson called the margin tax, which will also be on the 2014 ballot, a “fatally flawed, job-killing tax on businesses large and small that will stall economic development, put employers out of business, and lead to even higher numbers of unemployed Nevadans.”

In advocating for a mining tax as a legislatively approved alternative to the margins tax, the Republicans in the Senate are essentially asking voters to choose at the ballot in 2014 whether they prefer a tax on a specific industry or a tax on net business revenues.

Republicans justified the mining tax using statistics progressive-leaning Democrats usually tout.

They said in a statement Tuesday that Nevada’s gold mining industry produced approximately $8.8 billion in gross revenue and paid only $203 million in taxes.

Roberson also lifted an argument progressives have advanced for the past several years as they have campaigned for first lifting the mining industry’s constitutional tax rate and then levying a higher tax on the industry.

“Billions of dollars of nonrenewable natural resources are extracted from our state and shipped out-of-state every year,” Roberson said. “These resources cannot be replenished. At some point the gold will be gone. And, when the gold is gone, mining will be gone. It is imperative that we ensure that Nevadans get the best deal we can, while we can.”

Senate Republicans calculated in their press release that mining pays a 2.3 percent tax rate on gross revenue while the top tier of gaming companies pay a 6.75 percent rate on gross revenue.

Bringing mining’s rate up to 6.75 percent would yield $780 million for Nevada’s education system during the 2015-2016 and 2016-2017 school years, Republicans said.

Alternatively, raising the industry’s current net proceeds tax on gold mining to 10 percent would yield Nevada $630 million, according to the press release.

If the net proceeds tax on gold mining dedicated to the state was set at 10%, Nevadans would expect an additional $630 million over the biennium to fund education.

Alternatively, if gold mining was taxed on gross receipts at the same 6.75% rate that gaming pays, Nevadans could expect an additional $780 million per biennium to fund education.

At present, however, the constitution prohibits lawmakers from raising the net proceeds on minerals rate above 5 percent.

In 2011, Democrats in the Nevada Senate led the way in passing Senate Joint Resolution 15 with the help of Roberson and Kieckhefer.

Since the last session, mining industry lobbyists have worked to convince legislators that SJR15 is flawed and that passing it into law could give the mining industry a tax cut. Republicans contended that a legal opinion from the legal division of the Legislative Counsel Bureau shows that this is not the case.

“We urge our Democratic colleagues to allow SJR15 to be voted upon and sent to the people for their consideration, along with an alternative to the margins tax that specifically addresses the taxation of mining,” said Senate Minority Whip Joe Hardy, R-Boulder City.

Republicans in the Legislature have generally opposed tax increases, but have voiced support for a revenue-neutral reform of the tax system. Gov. Brian Sandoval has said he would veto a tax increase.

But the proposal by Republicans would put the issue to voters.

Last session, Roberson emerged as a vocal critic of the mining industry, supporting Democratic efforts to enact more scrutiny of the industry.

Sen. Greg Brower, R-Reno, who earned substantial campaign support from the mining industry in his race against industry critic Sheila Leslie, said he is considering supporting SJR 15.

"SJR15 gives the Legislature the flexibility we need to make tax policy that makes sense," Brower said.

Senate Majority Leader Mo Denis, D-Las Vegas, said Tuesday he would reserve taking an opinion on whether a mining tax should be used as an alternative to the margins tax on the ballot, emphasizing that he wants immediate action to increase funding for education.

“This will be part of a solution, but it’s not the end all," Denis said of SJR 15. "It's just a small portion of what we need to do.”

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  1. How can anyone say that SRJ15 is "flawed"?!?

    Read it for yourselves. It does exactly one thing: it repeals Article 10, Section 5 from the Nevada State Constitution and *nothing else*.

    That is precisely what is needed so the Legislature can treat mining like any other business in this State.

    I urge everyone to write to their representatives in Carson City and ask them to re-pass SRJ15 so it can appear on the ballot for voter approval.

  2. It's rare that Jim and I agree on anything, but this bill, and the ballot question it would create, are crucial for our state.

    Granted, more could be done, as multiple deductions that the mining industry takes advantage of are statutory and could be easily reversed, but the state Constitution should not play favorites with any industry.

  3. Casino Gaming is a Renewable Resource, where people will visit often as long as Gaming Corporations do not get overly greedy. However Mining is not renewable and must be used as the Taxing Engine to diversify our economy in Education, University Systems, Medical Schools, etc... While we should not place a Higher Tax than other Countries charge for similar resources, these Multi-National Corporations certainly deserve a Higher Tax than Gaming and their 2% Tax is just ridiculous when we are looking at Gutting many educational programs in a State that has one of the Lowest Educated Populations anywhere.
    It's time Politicians got us out of the Warehousing, Call Centers and Service Sector Jobs.