Last-Minute Mining Tax Reform Flounders In Nevada Special Session

In a scramble to dig the state of Nevada out of a significant budget hole created by the coronavirus pandemic, Democrats in the state Assembly introduced a measure late Thursday to raise taxes paid by mining companies. 

The attempted reform, called Assembly Bill 4, was approved in the Assembly on a party-line vote. But it was rejected by the Senate, where Democrats are one seat away from a two-thirds majority.

The mining industry benefits from a unique tax status, which is guaranteed by the state constitution. Taxes on profits from mineral extraction are capped at five percent and mining companies are allowed to apply 13 separate deductions to their gross revenues to lower their tax liability. 

As a result, 14 Nevada gold mines did not pay any state taxes last year according to an analysis of state tax records in the Nevada Current. 

Community advocates have been pushing for the state to raise additional revenue to help avoid some of the $530 million in cuts to education and health care proposed by Gov. Steve Sisolak. The state is faced with a $1.2 billion shortfall caused by lost sales tax, taxes on casinos and other revenue under COVID-19 shutdowns.

Educators, activists and environmentalists called on the legislature to support the mining proposal, which would have eliminated nearly half of the tax deductions available to mining companies. This type of tax reform avoids difficult constitutional changes which would be necessary to raise the overall rates paid by the industry.

Legislative aides estimated the bill would have raised an additional $54.7 million from mining companies.

Patrick Donnelly, who is the Center for Biological Diversity’s Nevada State Director, told lawmakers that increasing taxes on mining would have been a step in the right direction, but didn’t go far enough in addressing the industry’s constitutionally-protected special status. 

“We’d like to see the deductions ratcheted down further,” he said. “This alone is not going to solve the budgetary crisis.”

Senator Keith Pickard (R-Henderson) opposed the bill, he said, because it didn’t guarantee the additional revenue would have gone to education. 

“I would’ve been a strong yes if this were going to education,” he said.

Pickard and other legislative Republicans also criticized the way the bill was introduced — late in the day, with little time to review its potential impact.

Assembly Speaker Jason Frierson (D-Las Vegas) announced the proposal through an interview with the nonprofit Nevada Independent just two hours before the floor hearings began.

But Frierson defended his announcement to the news media, saying Republicans and representatives from the mining industry had been given sufficient time to look it over. 

“They’ve been aware that this has been a possibility long before today,” he told reporters, “I personally spoke with representatives of the mining industry earlier today to let them know what we were doing.”

Another bill concerning mining tax revenues was passed on Wednesday and awaits Gov. Sisolak’s signature. Senate Bill 3 would require mining companies to pay their estimated taxes for the next fiscal year in advance. It has strong bipartisan support.

Senators from both parties have also introduced counter-proposals to soften the deepest state budget cuts, such as measures that would  slash payments to health care providers in the state’s Medicaid program.  

Senate Republicans say they found more than $160 million in state reserves to add back into the budget. They want to use that money for programs like “Read by Grade 3,” which provides literacy specialists for underserved students, and other programs that treat autism. 

Senate Democrats have their own counter-offer, too, although they didn’t identify as much money to move around as the Republicans. Their plan includes just under $140 million in additional funding.  

The legislature will meet again Saturday, when they’re expected to vote on the competing proposals for budget cuts and furloughs for state employees.