Nevada Democrats Shift Tactics, Revisit Mining Tax Battle

State Constitution Has Cap On How Much Mining Can Be Taxed

Associated Press
August 03, 2020 - 6:02 am

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CARSON CITY, Nev. (AP) — Nevada lawmakers passed three resolutions on Sunday that propose changing provisions of the state Constitution that cap the amount of taxes that can be levied on the mining industry and require two-thirds majorities in the Legislature to raise taxes.

Battles over how to tax mining in Nevada have raged since prospectors first struck silver in the 19th century. The state Constitution requires mining businesses be taxed at less than 5% of what are called net proceeds — profit minus deductions for certain costs.

The resolutions passed through both the state Senate and Assembly and constitute a first step to increasing taxes on mining businesses. To amend Nevada’s Constitution, lawmakers must approve proposed amendments in two legislative sessions and then seek approval from the majority of voters in a subsequent election.

Democrats have long argued that mining businesses don’t pay a fair share of taxes. Increasing taxes on minerals like silver, gold and gypsum, they say, will provide needed funding for health care, education and other state programs.

The budget crunch sparked by the pandemic has amplified calls to cap deductions or create a tax structure based on gross proceeds, like Arizona and Colorado, which would allow for less deductions than taxing net proceeds.

In early July, the Democratic-controlled Legislature proposed a bill to limit the tax deductions mining businesses could claim. The bill died after they failed to sway any Republicans and fell short of the two-thirds majority that Nevada law requires to increase taxes.

Republicans accused the Legislature’s Democratic leaders of rushing through the proposals and bypassing constitutional safeguards that purposefully make tax increases difficult. But Democrats said moving three different proposals along in the process allowed the Legislature to keep its options open and gather more information and perspectives on the potential effects of changing the tax structure for mining businesses.

Sen. Julia Ratti, D-Sparks, said the requirement to revisit the proposals in 2021 meant there would be ample time to review and discuss the proposals.

“We’ve been talking about mining’s special place in the Constitution for decades. For one reason or another we never get there,” she said.

The resolutions, which passed through the Assembly and Senate on Sunday, all would remove the two-thirds threshold required to increase taxes. They propose three different changes to the state Constitution:

1. Assembly Joint Resolution 1 proposes removing the 5% cap and taxing gross proceeds at 7.75%.

2. Senate Joint Resolution 1 proposes replacing the 5% cap with a 7.75% tax on gross proceeds and sending funds to state residents, much like Alaska’s Permanent Fund pays state residents yearly dividends after collecting tax revenue from oil businesses.

3. Assembly Joint Resolution 2 proposes continuing to tax net proceeds, while increasing the cap from 5% to 12% and creating a floor based on local property tax rates.

A constitutional amendment could go into effect in 2023 at the earliest, if lawmakers pass one of the three resolutions again in the 2021 legislative session and win voter approval in the subsequent 2022 election.

The Nevada Mining Association opposed the proposals to tax gross versus net proceeds, but took a neutral position on the proposal to increase the cap on net proceeds. Tyre Gray, the group’s president, said mining businesses already pay the state’s business and commerce taxes. He warned that a tax hike could force mining businesses to shutter and cause layoffs in mines and secondary industries like trucking.

If Nevada were a country, it would be the world’s fifth largest gold producer, after China, Russia, Australia and Canada. Mining businesses grossed $7.8 billion in 2019 and, after deductions, paid $122 million in taxes to state and local governments. 

Legislative staff projected the three proposals could raise $147 to $607 million in revenue.