Nevada lets gold royalties slip away
With Nevada legislative Republicans and Democrats in court to determine whether a tax hike was legally enacted, large sums are going uncollected from the mining industry for lack of legal authority.
Goldman Sachs is predicting the price of gold will hit $1,575 an ounce within three months and $1,600 in six months. Other predictions go higher. OilPrices.com suggests that Donald Trump’s foreign policy belligerence will “push gold up beyond $1,700.”
Meanwhile, Nevada—the nation’s leading gold-producing state—is earning nothing from this boom. Nor will it for the foreseeable future.
By the heartbreaking margin of six tenths of one percent, Nevadans in 2014 turned down an effort to repeal a 150-year old mining tax loophole in the Nevada Constitution and begin taxing mining like other industries.
No one knows how much money the state has lost for the past 155 years in Nevada. But it likely dwarfs the funds that will be produced by the modified business tax rate and the motor vehicle technology fee at stake in the litigation between Republicans and Democrats now in Carson City District Court.
Though Nevada’s Carlin Trend is not normally listed among the world’s top gold deposits, it is the biggest producer within the United States. To tie everything together neatly, all those nontaxable revenues leave the state, because all the large mining companies operating in Nevada are what the law calls “foreign” corporations—out-of-state companies, most headquartered in Canada, one in Denver.
The loophole—which prohibits taxing the gross proceeds of mines—was adopted by the 1864 Nevada Constitutional Convention and reads, “The legislature shall provide by law for a tax upon the net proceeds of all minerals, including oil, gas and other hydrocarbons, extracted in this state, at a rate not to exceed 5 percent of the net proceeds. No other tax may be imposed upon a mineral or its proceeds until the identity of the proceeds as such is lost.”
The sponsor of Senate Joint Resolution 15, which became ballot Question Two of 2014, was Sheila Leslie, then a Washoe County senator and now an RN&R columnist.
The measure, SJR 15, went through two different sessions of the Nevada Legislature, with two sets of hearings, being vetted thoroughly before it reached the ballot.
Leslie said this week that lawmakers were outraged by what they heard in the hearings on the measure. While mining lobbyists tried to strangle the measure in legislative hallways and backrooms, the supporters of the measure wanted to keep a public spotlight on the resolution.
“Without Steven Horsford in 2011, who was so incensed by what we found out in the hearings, it never would have passed the first time,” Leslie said.
Industry would benefit!
Mining lobbyist Tim Crowley circulated an essay attacking Leslie herself: “She knows that despite mining providing only 1 percent of the state’s workforce and 4.4 percent of Nevada’s economic output, the industry contributes a disproportionately large 8.3 percent of the general fund.
Former state archivist Guy Louis Rocha responded: “Most other businesses in Nevada don’t enjoy a constitutional buffer when it comes to tax policy.”
Once it made it through two legislative sessions, the measure went on the ballot as a constitutional amendment. It was widely assumed that the measure would pass, given that it would tax out-of-state firms, and Nevada has become skilled at such maneuvers. As a result, no one mounted a campaign in support of the measure. And this was 2014, a year of legendary Democratic blahs. The party’s turnout at the polls was so weak that Republicans gained a whopping nine U.S. Senate seats and 13 U.S. House seats. Within Nevada, the GOP swept everything in sight, winning both houses of the legislature and all state offices elected statewide, a win that had not been experienced by Republicans since 1890.
Even at that, the measure would have passed if there had been anything approaching normal Democratic turnout. Ballot Question Two won in Clark County. Everywhere else it lost. In small counties where the mining industry held sway, the ballot measure was trounced. In Elko County, home of the Carlin Trend workforce, the vote was 1,450 yes to 8,684 no.
During the campaign the industry actually argued that the ballot measure would lower mining taxes! It still angers Leslie.
“In 2014, the industry put forth absurd arguments that mining could actually be taxed less if the tax protections were taken out of the constitution, trying to obfuscate the issue when anyone could plainly see how Nevada was being ripped off by multi-national corporations who happily took their profits out of Nevada while tossing a few charitable contributions and lots of campaign cash to stall any thoughts of serious tax reform,” she said. “Meanwhile the environmental degradation has continued unabated and, in fact, aided by a state regulatory system that is clearly in mining’s back pocket.”
At the 2015 legislature, with Republicans in control of everything, there naturally was no effort to revive the measure and get it back on the ballot (though in fact, Republican support for Leslie’s measure, particularly in Senate, had helped her get it passed). But once Democrats re-took control of the legislature, at both the 2017 and 2019 legislatures, lawmakers ignored any effort at bringing the resolution back to life. So instead, they are bogged down in court on another tax matter.