Only days after the state of Nevada celebrates its 150th anniversary of statehood on Oct. 31, voters will be asked on the General Election ballot whether to repeal a section of the Nevada Constitution on which the very question of statehood hinged those 150 years ago.
In September 1863 the residents of the Nevada territory voted by a margin of 4-to-1 to seek statehood, but in January 1864 they rejected by a margin of 4-to-1 a Constitution that would have taxed mining at the same rate as other businesses.
Then in July 1864 a revised Constitution that changed mining taxes to “net proceeds” — allowing deduction of expenses — and capping the tax rate at 5 percent. It passed with a vote of 10,375 to 1,284.
Article 10 of the Nevada Constitution 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 provision takes into account that the value of minerals is depleted over time.
That is how much the residents of the territory, attracted to the region by mining and dependent upon mining for their livelihoods, feared the damage a meddling Legislature could do to the lifeblood of the state.
A yes vote on Question 2 on the November ballot would repeal that provision of the Constitution and allow the Legislature in 2015 to raise taxes on mining, though it would take a two-thirds vote of both houses of the Legislature.
If lawmakers are willing to give away tax breaks worth $1.3 billion to attract Tesla Motors to build a battery manufacturing plant here instead of another state, imagine what they might be willing to try to extract from a captive industry — one that can’t move its gold mine to Texas.
Mining is why Nevada exists and why vast portions of rural Nevada survive today. The mining industry directly employs more than 10,000 workers and provides an estimated 14,000 jobs for those who are vendors and service providers for mining. Mining jobs average $88,000 in wages. Mining pays more than $400 million a year in state and local taxes.
Nevada Mining Association President Tim Crowley scoffs at those who claim mining fails to pay its fair share in taxes. “Mining pays every tax every other business pays,” he says. The net proceeds tax is over and above the sales, business, payroll, property taxes on facilities and other taxes other industries pay.
The net proceeds tax revenue has fallen in recent years because the price of gold has fallen, just as property tax revenues are down due to the decline in value of homes and land.
Crowley has pointed out that lawmakers can and have increased the tax revenue from mining by simply reducing the number of deductions allowed for mining expenses.
This measure would allow the Legislature to pluck the golden goose and roast it on a spit.