Group pursuing initiative to raise taxes on gold mining

By David McGrath Schwartz

Thursday, Dec. 3, 2009 | 7:39 p.m.

A liberal advocacy group will go after gold miners’ state tax deductions, in an effort to raise more than $200 million a year for state coffers.

The board of the Progressive Leadership Alliance of Nevada voted last month to pursue a statutory initiative to eliminate most of the deductions that reduce the taxes paid by gold mining companies.

Liberals have argued for years that mining does not pay its fair share in tax — an argument that has gained traction as gold prices have soared to record levels while the state’s general fund has faced massive budget shortfalls.

Bob Fulkerson, executive director of PLAN, said the group decided to go after mining because “that’s where the money is.”

“All the state’s other industries — tourism, gaming — are on the ropes,” he

said. “We have an enormous need in our budget. One industry is recording all-time profits, and that’s the mining industry. Yet they’re paying next to nothing to the general fund.”

The statutory initiative process would require the collection of 97,000 signatures by November. If the initiative were qualified by the secretary of state, the Legislature would have 40 days from the start of the 2011 session to enact the legislation. If the Legislature failed to take action, the initiative would then be placed on the 2012 ballot.

Fulkerson said the group hopes to raise $250,000 to cover legal costs and signature gathering.

Besides paying the payroll, sales and other taxes that other businesses pay, mines pay a “net proceeds of minerals” tax based on the value of the ore, after costs such as extraction, transportation and marketing are deducted.

Tim Crowley, president of the Nevada Mining Association, said it would be foolhardy to rely on one business to fill the state’s shortfall.

“We believe that all businesses need to do their fair share,” Crowley said. “We’ve looked at all the tax studies that have been done, and they’ve all concluded that we need to apply taxes evenly to all business. That’s smart tax policy.”

He noted the 2009 Legislature never considered singling out mining. That sentiment has largely come from PLAN, he said.

Crowley said that he believes it’s illegal to change the deductions that mining companies can take, which are set forth in statute. Changing the deductions would alter the “fair market value” of the ore, artificially changing its value, he said.

Nevada produces about 8 percent of the world’s gold, according to the state

Division of Minerals. It trails only China, South Africa and Australia in production.

In 2008, mining paid $49 million in minerals tax to the state’s general fund, along with $42 million to counties’ coffers. That’s an increase from

2005, when mining paid $19 million to the state and $22 million to counties.

By comparison, the state’s liquor tax brought in $41 million and its cigarette tax generated in $110 million in 2008.

Crowley said that while gold prices are at record levels — $1,200 an ounce — the industry has never been stable, falling prey to boom-and-bust cycles that policy makers say Nevada’s existing tax structure already suffers from.

“It would be symbolic to attack one industry that’s doing well,” he said. “We all know the price of gold is going to drop. It would be hitching your wagon to a buggy that’s going to crash at some point.”

It’s unclear how much legislative appetite their would be to take on mining. Any tax increase requires a two-thirds vote of the Legislature and Republicans in the state Senate have strong ties to rural mining areas.

Also, the lawmakers have hinted they’re interested in pursuing a broader tax structure. Mining, which hires its own small army of lobbyists each session, could be a key ally in rounding up votes to change tax policy.

Still, some lawmakers see mining as a popular target with the public. Assemblywoman Sheila Leslie, D-Reno, and one of the most liberal members of the Legislature, said, “My constituents are constantly asking me why mining isn’t paying their fair share.

“If it’s a choice between raising the mining tax or raising the sales tax, I don’t think it’s a question.”

David McGrath Schwartz can be reached at 775-687-4597 or at [email protected].