Las Vegas Sun

May 22, 2015

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Memo from Carson City:

Mining isn’t the only industry with constitutional tax protections

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Steve Marcus

Miners set off a blast at the PABCO Gypsum mine near Lake Mead during an earth science workshop for teachers Wednesday, April 4, 2012. The workshops are sponsored by the Nevada Mining Association and the Nevada Division of Minerals.

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Mining should pay its fair share, say critics who want to remove the industry’s separate and special constitutional tax rate.

Gold prices are high, but the state’s mining industry pays a constitutionally capped tax rate, and the state allows the industry billions of dollars in tax deductions before paying a 5 percent rate.

No matter the price of gold and no matter how much of it mining companies take out of Nevada, its tax rate remains the same because of that exemption in the constitution. Lawmakers who would like to collect more from the industry say their hands are tied.

Who else could accomplish such an ironclad protection but the mining industry with its legions of lobbyists at the Legislature who peddle influence and cram campaign coffers full of cash?

Well, there’s the financial industry and banks, retailers and other businesses with inventories, and homeowners.

They've not only won special tax provisions in the constitution; they won total exemptions from taxation.

And for good reason, banking and retail representatives say.

In the 1970s, Nevadans decided retailers shouldn’t be taxed on their inventories, which had been taxed since statehood. The repeal measure passed the two legislative sessions required to amend the constitution. The retailers started a "Whack a Tax" campaign and persuaded voters to approve the proposal during the 1978 election.

“The rationale on this inventory exemption was that there were certain items kept for years and years that were taxed again and again,” said Carole Vilardo, former co-chairwoman of the Nevada Committee to Repeal the Inventory Tax and current executive director of the Nevada Taxpayers Association.

Retailers won an exemption that they do not enjoy in seven other states to this day, and it kept Nevada competitive with California, which also eliminated its inventory tax in the 1970s.

The constitution now says “inventories are exempt from taxation. The Legislature may exempt any other personal property, including livestock.” (And, yes, the Legislature chose to exempt livestock from taxation.)

Bankers and the financial sector also hold constitutional tax exemptions.

Nevada cannot impose a tax on bonds, shares of stock, securities and other financial devices.

“These are things that represent investments or obligations somebody undertakes,” said Bill Uffelman, president of the Nevada Bankers Association. “It’s not income to me. It represents my share of that.”

The tax exemption prevents Nevada from levying a shares tax as other states do, Uffelman said.

It might be relevant to today’s mining debate, however, that lawmakers found a way to charge banks more despite that constitutional protection. In 2003, they levied a higher payroll tax rate on banks than on other businesses.

In 1982, Nevadans also enshrined in the constitution a protection from taxation for their furniture and household goods. (Personal property kept outside the house such as boats and campers, is also exempt.)

Fast forward a few decades, and the Nevada Legislature will hold a hearing Tuesday about a resolution removing the mining industry’s separate and special constitutional tax rate.

The tax rate could get chopped out of the constitution, allowing legislators to raise mining taxes so that, as critics say, the mining industry can finally pay its fair share.

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