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September 26, 2017

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Taking mining tax out of the constitution could free up more revenue for urban Nevada

Cry schools, and let slip the tax on ore.

That was the battle cry from Republicans in the Senate when they introduced a mining tax proposal this month that would raise money for education as an alternative to a business tax headed for the ballot.

Indeed, changing the way mining is taxed could shift millions of dollars in tax proceeds that have given rural counties a leg up in education funding to state coffers, allowing lawmakers to more equitably distribute the money statewide.

Republican lawmakers backing the idea say they have no intention of taking money from rural counties. They want to increase the overall tax rate that mining pays and flow whatever revenue results into the education budget.

But that’s not the only way to find more dollars for education.

It’s a complicated explanation, but the end result of changing how mining is taxed could mean that millions of dollars could flow from rural counties to the state’s most populous county, mitigating the oft-repeated concern that Clark County tax dollars disproportionately help the rest of the state.

Here’s how it works:

If the Legislature passes Senate Joint Resolution 15 this year, voters would have the chance to remove the mining industry’s tax rate from the state constitution in 2014.

There have long been cries that mining does not pay its fair share in Nevada, but the question before voters would not be about raising taxes on mining. It would allow Nevadans to remove the constitutional tax rate and — this is essential — do away with the constitutionally mandated revenue-sharing split between counties and the state.

Right now, minerals extracted from mines get taxed at 5 percent after deductions. The counties get the first cut by applying their property tax rate; the state gets the rest — usually a little less than half of the proceeds. (The counties that get the most, of course, are the rural counties with mines.)

If voters remove that provision, the Legislature could unlock money trapped in counties and send it flowing to the state’s school funding system.

“I think as far as that theory goes, it’s certainly a mechanism (for school funding),” said Assemblyman William Horne, D-Las Vegas.

He said removing the split could bring more money to the state general fund, period, regardless of whether its earmarked for schools.

Rural counties would howl, but Clark County would benefit. Savvy legislators could say such a move only gives the state the freedom to move the state’s wealth to the areas of the state that need it the most. (And studies show Clark County is the needy county in the state’s inequitable education formula.)

Clark County accounts for less than one tenth of 1 percent of minerals tax money in the state.

So any mining tax shift from local governments to the state could allow Clark County legislators to funnel money south to pay for education programs.

But legislators not inclined to punish rural counties could leave the rurals their property taxes and apply a second tax.

Senate Minority Leader Michael Roberson, R-Henderson, deliberately left his mining proposal open ended, saying an alternative way to tax mining would be developed by consensus. And he stated explicitly that his intention is not to take revenue from rural counties.

Many other Western states — New Mexico, Montana, Wyoming and Colorado — have taxed non-renewable resources with a severance tax.

Such a severance tax could be directed to a tax trust fund and divvied up throughout the state.

But status quo has a long history of success in the Nevada Legislature, and nothing changes without SJR15.

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