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Will Nevada force mining companies to pay their fair share?

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Judith Lewis Mernit | Jun 10, 2013 05:00 AM

The Nevada State Legislature wrapped up its biennial legislative session last Tuesday morning with a number of “good, bad or just plain weird” bills, as the Las Vegas Sun put it, headed to the desk of Gov. Brian Sandoval for approval. The Governor has already vetoed some of the proposed laws, including one that would have lifted the cap on damages from employment discrimination claims, and he says he plans to turn down a law mandating universal background checks on gun purchases in the state. He has signed many more — a law against teacher-student trysts, a measure preventing municipalities from banning dogs by breed, and a prohibition against tripping horses — a common practice, evidently, in certain rodeos.

If, given Nevada’s chronic budget problems, that strikes you as much ado about little, you wouldn’t be alone: The state’s political reporting elite almost unanimously lamented the inability of this legislature to do anything of consequence. “So little happened in Carson City this year that, barring an earthquake toppling the Capitol, the 2013 session will be remembered as the most uneventful in decades,” wrote Ed Vogel in the Las Vegas Review Journal.

The inaction was especially disappointing given that Nevada’s public schools continue to rank among the worst — and the worst-funded — in the nation, and despite modest recovery from the 2008 housing crash, poverty and hunger in the state continue to strain shoestring social services, as well as services for the elderly and mentally illThe most significant immediate revenue-raising measure to clear both houses was a Clark County sales tax hike to pay more police salaries in the state's most populous county; for that, the Governor dragged sleep-deprived legislators back into three-hour special session Tuesday morning. The rest of Nevada’s $6.5 billion budget will get paid over the next two years, as it did over the last two years, with the uncertain income tourists pay in sales taxes, and taxes on hotel rooms, entertainment and gaming.

“This was a session of great expectations,” Nevada’s preeminent political reporter, Jon Ralston, told Nevada Public Radio. “And those expectations were dashed.”


There was, however, at least one potentially bright moment for Nevada’s economic future: In late May, both Senate and Assembly passed a resolution to remove the cap on mining taxes that was written into Nevada’s constitution in 1864. Nevada's constitution requires that two separate legislatures approve the measure; significantly, this is the second time through. And it’s something the governor can’t veto: The constitution prohibits gubernatorial interference in the constitutional amendment process.

Golden Nugget
The golden rooster at John Ascuaga's Nugget Casino in Sparks, NV.

Four-fifths of all the gold mined in the U.S. comes out of Nevada — one fifth of the world’s supply. And yet since the days of the Comstock Lode very little of the proceeds from those mines has benefited the state’s citizens, even as gold prices have soared. Instead, the constitutionally-mandated Net Proceeds of Minerals Tax has for a century and a half limited mining’s tax burden to a measly five percent of profits after all deductions. And the 100 or so mining companies operating in the state, the largest of them Canadian, have deducted liberally: In 2010, mining paid just a little more than one percent in taxes on the $6.6. billion worth of minerals they plied from the earth.

The proposed amendment to the state constitution, Senate Joint Resolution 15, won’t change any of that right away. Amending the state constitution requires voter approval as well, and the measure won't appear on the ballot until November 2014. Then lawmakers in the next legislative session, in 2015, will need to agree on a tax hike. Still, it’s a historic move, one that signals a shift in both public and political perceptions of the industry, which not long ago seemed untouchable (“Nevada’s Golden Child,” HCN 4/26/2010).

Bob Fulkerson, executive director of the Progressive Leadership Alliance of Nevada (and an HCN board member), says that mining set up its own fall from grace over the years by stretching the definition of what’s deductible. In 2011, when then-state Senator Sheila Leslie held a hearing on mining’s accounting practices, “what came to light was a laundry list of deductions, coupled with the fact that mining companies had rarely, if ever, been audited by the state,” Fulkerson wrote in an email. Mining companies had been deducting from their state tax burden everything from marketing fees paid the World Gold Council to expenses associated with firing employees — and no one had stopped them. The discoveries “took the press and other legislators aback,” Fulkerson says. “Mining’s been on its heels ever since.”

On its heels, perhaps, but still standing — and with ample ways to keep a lock on the state’s natural resources. “I just learned that the biggest owner of ranches in Nevada are (mining companies) Barrick and Newmont,” Fulkerson wrote. “They’re buying ranches to ease the water hassles, to control access and to develop the minerals. Dude, where's my state!?”

Judith Mernit is a contributing editor for High Country News.

Photo courtesy Flickr user Reno Tahoe.

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