First, remove tax loopholes

There is an effort going on by mining industry lobbyists to stop a proposed constitutional amendment that would, if passed by voters, remove an industry tax loophole from the Nevada Constitution.

Their argument is that instead of singling out the mining industry for a tax increase, a broad-based business tax should be created. By making that argument, they are hoping to distract attention from a constitutional amendment wending its way through the Nevada Legislature.

The Reno Gazette-Journal last weekend became a voice of this emerging consensus with an editorial. “The goal of policy-makers should not be to pick out winners and losers in the tax system,” the newspaper argued. “Neither should they pick out individual industries to target for higher taxes. Instead, the state needs to consider a top-to-bottom rewrite of its tax code to bring it in line with the way the state economy works in 2012.”

There is a problem with this line of argument. The Gazette-Journal is confusing tax policy with taxation. Its editorial attacked an initiative petition filed by Monte Miller, a Las Vegas businessperson who was an advisor to Gov. Jim Gibbons during his administration. The petition seeks to allow the Legislature to increase taxes slightly on mining but would protect the industry’s tax break.

Both the initiative petition and the argument made by the Gazette-Journal and the mining lobbyists about a broad-based business tax seek to do the same thing—divert attention from an effort to reform the favored position of the mining industry in the Nevada Constitution.

In 1864, when mining industry barons considered themselves and their mines the “paramount industry” of the state, it convinced delegates to the Nevada constitutional convention to write a tax break into Article 10, protecting them from taxation of the gross proceeds of mines. Whatever sense it made in the 19th century, in the 21st it allows foreign mining companies to despoil the land while shipping Nevada capital to Canada.

Imagine if Nevada had become a state in the 1960s when the gambling industry was riding high and its lobbyists had gotten delegates to write a limit on gambling taxes into the new constitution.

The initiative petition the Gazette-Journal attacked would preserve that exemption, to be sure, and should be defeated. But the newspaper plays into the hands of its sponsors by failing to make distinctions when it should be educating the Nevada public on the constitutional favoritism shown to the mining industry.

Though the newspaper never mentions it, the 2011 legislature approved a constitutional amendment to finally pry out that loophole. Their measure, Senate Joint Resolution 15, must still be approved by the 2013 legislature and then be approved by voters. Unless it passes, the state will be unable to conduct the “top to bottom rewrite of the tax code” the newspaper wants because part of that code will be shielded from revision by constitutional language. See how it’s all linked together?

The newspaper doesn’t want the mining industry singled out for taxation, but the Nevada Constitution already singles it out for a tax privilege that is not enjoyed by any other businesses in Nevada—dry cleaners, barbers, butchers, bakers, candlestick makers. The Gazette-Journal needs to keep the lines straight because the mining industry has a vested interest in confusing tax policy and taxation. The Miller initiative should be defeated, as the Gazette-Journal recommends, but let’s keep our eyes on the ball: Statutes, not constitutions, are the place for tax loopholes.