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Forget audits: Mining exploits Nevada through tax loopholes
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SPECIAL TO THE LAS VEGAS REVIEW-JOURNAL
Nevada's Taxation Department director kicked off a firestorm recently when he admitted to the Senate Judiciary Committee that no one actually has the time or ability to audit the tax statements of Nevada's world-class gold mining industry. Both Senate Majority Leader Steven Horsford and Gov. Brian Sandoval immediately called for a fresh audit of the industry.
Although this is laudable, I'm sure the mining industry welcomes the distraction from the real issue: Mining is legally exploiting the state of Nevada thanks to a system of sweetheart tax loopholes and its protected status in the Nevada Constitution.
An audit will not change the sad truth that Nevada's largely foreign-dominated mining industry is mining billions of dollars of gold and too often gets away with not paying a single dime of net proceeds taxes on it.
Longtime Nevada journalist and independent researcher Hugh Jackson found "111 times over ten years, one Nevada gold mine or another claimed that gold produced at that mine had no taxable value. As a result, more than $4.3 billion was produced at gold mines where the mines paid no mining taxes whatsoever."
Barrick and Newmont mining produce 90 percent of the gold in Nevada, according to Jackson. In past years, some of their mines have produced a half-billion dollars or more in gold annually, yet reported zero taxable value. This is because of sweetheart tax loopholes in Nevada Revised Statutes they enjoy for the following: "Extraction, Transportation, Processing, Marketing and delivery, Repair and maintenance of equipment, Fire insurance on plant and equipment, Depreciation of the cost of machinery and equipment, Contributions or payments for unemployment insurance, social security, fringe benefits for employees, Royalties paid to claim holders, which are taxable to the recipient."
But then, mining lobbyists from Jones Vargas (the same law firm where Sandoval worked of late) also went to the Nevada Tax Commission, which granted mining 45 additional loopholes such as: "Accounting, advertising, bonus, cash awards, severance package, sales and use tax, travel, leases and rentals, management fees, medical costs "
Because of these allowable deductions, it is doubtful that an audit will turn up any hanky panky from the gold miners' tax reports. Why would they want to cheat Nevada when they can take from the people legally? In 111 mines where they produced billions of dollars of gold tax-free, they freely admitted to Nevada that there wasn't anything left to pay taxes on, thanks to the laundry list of deductions they took. That's why the real issue here isn't the lack of state audits; it's the sweetheart deal that is unique to the mining industry.
A system that porous and that riddled with loopholes is a farce. It doesn't need more rigorous auditing. It needs to be changed. The audits aren't the problem. The deductions are.
Compare mining to the gaming industry. Steve Wynn spent $5 billion to build the Wynn Las Vegas and Encore. Did he get to deduct those costs from the gross gaming tax? Why should mining get to deduct its production costs? In 2008, mining took $5.7 billion in gold and paid $40 million in mining taxes to the state general fund. In 2009, gaming lost $6.8 billion, yet still paid $1 billion to the general fund.
We have the momentum to make substantial improvements. Mining has no credibility outside of its 25 lobbyists and the good ol' boys (and girls) clique in the Legislature. In poll after poll, the people of Nevada overwhelmingly support mining tax changes.
It's time to dump the loopholes. Assemblywoman Peggy Pierce, D-Las Vegas, has courageously offered a bill to cap the percentage of deductions mining can take. This is a big first step that the Legislature and governor should welcome with the same vigor as the audits.
Some legislators say it will be impossible to muster the two-thirds support required to limit deductions and make mining pay more. Maybe they are right, but it's high time that a vote is taken for us to see who stands with Nevada and who doesn't.
In addition to that, the Legislature should, by simple majority vote, place a question on the 2012 ballot to remove mining's tax protections from the Nevada Constitution. The voters would overwhelmingly pass it. Then, in 2013, the Legislature could vote to affirm the voice of the people and -- voila! -- no longer would mining enjoy its constitutionally guaranteed tax shelters.
That would then free up needed new revenues to help avert campus closures and overcrowded classrooms. A revenue crisis of historic proportions threatens to leave Nevada's kids with no hope for a decent education and leave our most vulnerable to grow sick and literally die on our streets. Legislators need a more sane and humane solution, and must force mining to be part of it.
As Jackson discovered, Barrick and Newmont produce more gold from Nevada than from any single country. They are not going anywhere if they have to start paying.
Mining is critical to our state's economy, and no one in their right mind wants to chase away that business or cost people their jobs. But ask yourself: Can giant, wildly profitable mining firms afford to contribute more to this state? Or should their 25 lobbyists call the shots to protect mining's coddled status while our state burns down?
Bob Fulkerson (bfulkerson@planevada.org) is state director of the Progressive Leadership Alliance of Nevada.
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The fix has been in for years since about 1865 when the feds stopped running the mines to finance the Civil War and guarding them with US Troops....mining SHOULD and COULD fix our budget crisis NOW with their proper payment of taxes...don't hold your breath the politicians in Carson will RUN to aid their buddies in the mining industry....too much (vig) is at stake to let a little thing like catastrophe to stop the fix.....
Governor, hiring Neilander and a team of GCB auditors is not smart nor prudent, however it is a waste money and just a tad grandstanding. Mommie, Mommie, look at me and what I am doing to those big old bad mines! Are you kidding me??? Audits are not needed given all the legal loopholes that mining enjoys, many of which are now current governor help give them. (imagine that??) Either narrow or eliminate many of the deductions they enjoy and start them down the road to paying what they should have been paying all along. I wish we could prove collusion between mining and those that handed over all the deductions, because then we could go back and recoup what has been "stolen" or "swindled" out of Nevada. Governor get serious! NTC and others stop jacking around and get serious with mining because you owe it to the state and its people.
Ok. I have been saying all along that Sandoval is a dufus and does not know what he is doing but I may have been wrong, but only partially. I think he knows what he is doing when it comes to the mines because they are the ones that are probably buttering his bread so he is not doing what needs to be done. For the mines, eliminate the deductions and do it now, and do not lower the tax rate. Start eliminating the needless and brainless exemptions to Sales and Use tax, because most of them make no sense whatsoever. Start taxing services. IT made sense to tax tangible personal property in the past when the split was 70% Tangible personal property and 30% services. However that has flip flopped and we need to adjust to that fact. Do all this and the budget problem is solved, but we need to do more while we are at it. The educational structure needs to be looked at and adjustments made because quite frankly there are to many "chiefs" and not enough "indians". The College system needs to be revamped to consolidate where it is prudent and eliminate redundancy, thus eiliminating costs. Reign in the collecting bargaining powers of the county and city unions and cut back wages that are out of control. Need to put tighter controls on sick and vacation, and overtime in the counties. People need to understand we are all in this together and the only way out is together.
Why is it that every citizen of Alaska gets a check from the oil companies extracting alaskan oil while in Nevada we give away our mineral resources for essentially nothing? Are we really this stupid? Time to Recall Sandoval and tax the mining companies at 20-30%. Budget crisis solved.
The governor and his mining consultants wrote a speech and told the 6 year olds in my classroom they would pay, pay, pay this year. This is because we ALL needed to SACRIFICE. When is mining going to pay its fair share?
OK. . . mining will take $4.2 Billion in deductions legally. And the governor will take $300 from each and every child in the state. We will all make less money. The foster care system will be affected. The mentally ill will be put out on the streets. The poor and the weak will take the hit this year.
But does the rape need to continue? Just because they have abused us, does that mean we let them continue? When the gold is gone, what will we have left in this state to show for it? Anyone can see this is just not right - it's not a little wrong, it's a blaring obvious mistake.
The mining companies know that you get what you pay for.
Another point. Although gaming paid many fold taxes to Nevada, it's tax rate is 6.75%. What is YOUR tax rate, average Nevadan? Now you know why Wynn and other Nevada gaming moguls are over in Macau ("socialist" mainland China) building multi-billion dollar resorts so China's wealthy elite don't have to come to Nevada anymore.
This is disgusting. The mining companies are stealing our precious metals. This is clearly outright theft from our state. I don't care what sleazy laws past lobbyists have paid our corrupt legislators to create...this is theft from the people and children of Nevada. How poignant that the Governor is in the back pocket of the mining industry. This governor is destroying education in the state and personally rolling in the mega profits of the out of state mineral thieves. Time for a real change. Disgusting.
Don't tax them because they might go to Iowa and mine gold...
@majorzot. In 2009, the mining industry had gross revenue of 5.8 Billion dollars. After applying the legal deductions, that figure dropped to 1.8 Billion, which resulted in a tax of 47.8 MILLION to the state and a similar amount to the counties. In 2010, the gaming industry reported 5.8 Billion in gross gambling profits. On that amount, they paid 417 MILLION in taxes to the state. Explain to me please how they are paying their fair share when gaming is paying almost 10 times as much on similiar gross revenues? I am not happy about the cuts to programs such as education, social services, etc.