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October 21, 2014

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J. Patrick Coolican:

Where are the Democrats in extracting more taxes from the mining industry?

Image

NEW YORK TIMES FILE

Nevada, the Silver State, is also a major producer of gold, which is selling for around $1,600 per ounce in March 2013.

J. Patrick Coolican

J. Patrick Coolican

The surprise move this week by Nevada Senate Republicans calling for a mining tax increase as an alternative to the business margins tax offered up some fascinating political theater and intriguing questions.

My first one, and I’m hardly alone, was this: Where the heck were the Democrats? I think I know where they were — they were tallying up campaign money from rich mining interests. I’ll get back to that in a minute, but first, quick background:

The state’s gold mining companies, which have been raking in big revenue in Nevada in recent years to supply world demand for the shiny commodity, enjoy a highly favorable tax and regulatory environment in Nevada.

Our state constitution provides a privileged place for mining, allowing a 5 percent tax on net proceeds of the mines. This allows mining companies to deduct significant expenses before they pay the levy on this nonrenewable resource. (Like other companies, mining firms also pay property, sales and modified business tax.)

Despite the gauzy TV ads you may have seen recently from the Nevada Mining Association, when we talk about mining in Nevada, we’re talking almost exclusively about gold. Furthermore, we’re talking about two companies, Barrick and Newmont Mining Corp., which mine here in Nevada but whose corporate headquarters are in Toronto and Denver, respectively.

For comparison’s sake, other states tax their most valuable commodities — Alaskan oil and Wyoming coal, for instance — at far higher rates than we tax our gold mining companies.

To rectify the situation during the state government fiscal crisis in 2011, state Sens. Sheila Leslie and Steven Horsford pushed Senate Joint Resolution 15, which would eliminate the constitutional provision on mining.

It passed the Senate and the Assembly in 2011. If it passes both houses again this year, it goes to the voters in 2014.

Strangely, however, Democrats have so far been sitting on their hands and mum on their plans to introduce the measure this session, even as many of them sought an alternative to the business margins tax that the teachers union qualified for the 2014 ballot.

This was foolish on the part of the Democrats, as a mining tax hike enjoys widespread public support in the place where elections are won and lost — Southern Nevada, which derives very little benefit from the gold mining business. (In Nevada, the simple rule is that voters are always in favor of taxes on someone else.)

And now the Republicans, led by state Senate Minority Leader Michael Roberson, have beat the Democrats to the punch.

So, again, where were the Democrats?

On a hunch, I checked their campaign finance reports.

Sure enough, of the nearly $1 million that Barrick, Newmont and the Nevada Mining Association spent this past election cycle on state races, much of it was on Democrats.

Barrick gave $10,000 to Nevada Senate Democrats, plus $2,500 to Majority Leader Mo Denis. Newmont gave $50,000 to the state Democratic Party, plus $5,000 to Denis and $17,500 to his political action committee. Kelvin Atkinson received $10,000 from the industry. Assembly Majority Leader William Horne received $13,500. Speaker Marilyn Kirkpatrick and just about every other Democratic member of the Assembly, except for the ever-pure Peggy Pierce, received industry money.

Odd that. The only gold found in their districts is in pawn and jewelry shops.

Why the industry gave so much to Democrats isn’t surprising — there are more Democrats than Republicans in the Legislature, and special interests usually sidle up to whomever is already in power.

And the industry has smartly recognized that urban Democrats are their key vulnerability. After all, for the Democrats’ constituents, the gold is mined so far away it may as well be the moon. And the Democratic base is smart enough to know that with gold hovering near $1,600 an ounce, a small tax hike on mining companies will have next to no effect on the industry because this is where the gold is!

But for years, most Democratic elected officials have sold out their base on the mining issue, happy to take a campaign check and to listen, often over a glass of wine, to the tendentious arguments of the capital’s bevy of mining lobbyists — there are more mining lobbyists than state senators.

And, so, Roberson saw an opening, and he took it. The beauty of it all is that Roberson and his Republican colleagues have also received their share of mining money. In fact, state Sen. Greg Brower probably owes his election to the industry. So, now they can tell the voters that they aren’t influenced by money, unlike, you know, some people. It’s genius.

CORRECTION: Photo caption updated to show that gold is not selling at record high prices. | (March 10, 2013)

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  1. Giving the state's mining industry essentially a free pass on business taxation makes no sense, and imposes a greater burden on everyone else.

  2. We always here the crying that Gaming does not pay enough yet they pay on their GROSS GAMING INCOME, no deductions. Even a casino that is losing money has to pay the gaming tax.

    Mining should be treated the same way, 5% of their GROSS. Once that goes runs out there is no more. That gold comes from Nevada's resources.

    Gaming will be paying forever. Mining will be leaving us high and dry once they suck every ounce of our resources out.

    Time for our elected leaders on both sides to step up and fix this problem.

  3. Mr. Coolican,

    Have you noticed that a substantial number of ads appearing in prime locations on the Sun website are from the mining industry?

    Been nice reading you.

  4. For once the Democrats and keynesian economists can step foward together and stand on their economic principles and be correct. In good economic times, like the mining industry and precious metals have experienced since 2003 and still, government should increase their business and profit taxes. That's all the Republicans, who know the economics and facts, are asking to do. The real question to ask is why did it take the Republicans so long to step forward and do so?

    CarmineD

  5. Just another excuse for Democrats to tax and spend. The mining industry is easy to demonize and at the moment appear to be the low hanging fruit in Democrats never ending pursuit of funding for more spending.

    Tax to spend, spend to tax, enough is never enough, the ends justify the means... the people be damned. I'm beginning to believe that Democrats are as evil as their behavior.

  6. The states costitution protects the mining industry from higher taxes,and until the crooked folks that we elected to office up in Carson City change that it will remain status quo.

  7. Commenter Tanker1975 states, "The 2011 Barrick Mining annual report is out. If you read it, there are some very interesting facts that emerge. This is a link to the Barrick Annual Report for 2011.

    http://www.barrick.com/files/doc_downloa............

    Barrick Mining either owns outright, or is a partner in a joint venture in 7 gold mines in Nevada. To determine my estimate a profits for 2011, I assumed the price of gold at $1500 per ounce, or less. The current price for gold is in excess of $1750 per ounce. The first four mines listed are totally owned by Barrick Mining. In 2011, according to their own figures, Barrick Mining produced almost 97 TONS of gold from their Nevada Mines. That is same weight as 16 full size, original HUMMERS. Barrick Mining has reported record profits and dividends in both 2010 and 2011.

    The Cortez Hills Mine produced 1.42 Million (44.375 tons) ounces of Gold at a cost of $245 per ounce. If you assume a conservative profit of $1000 per ounce, you get a profit for the Cortez Hill mine of $1,420,000,000. Barrick paid a total of $47,300,000 in local and state taxes last year.

    Bald Mountain Mine produced 93,000 ounces (2.9 tons) at a cost of $558 per ounce. Assuming a profit of $900 per ounce for the Bald Mountain Mine, you get a profit of $83,700,000.

    The Gold Strike mine produced 1.09 MILLION ounces (34.0625 Tons) at a cost of $511 per ounce. Again assuming a profit of $900 per ounce for the Gold Strike mine, you get a profit of $981,000,000.

    Ruby Hill mine produced 127,000 ounces (3.96875 tons) at a cost of $334 per ounce. Assuming a profit of $1000 per ounce for Ruby Hill, you get a profit of $127,000,000.

    Barrick Mining is involved in three joint ventures in Nevada.

    Barrick owns 33% of the Marigold mine. Barrick's share of production was 51,000 ounces (1.59675 Tons) at a cost of $761 per ounce. For the Marigold mine, assume a profit of $700 per ounce. The total profit would be $35,700,000.

    Barrick owns 50% of the Round Mountain mine. Barrick's share was 178,000 ounces (5.5625 Tons) at a cost of $612 per ounce. Assuming a profit of $800 per ounce for the Round Mountain mine, we get a total profit of $142,400,000.

    Barrick owns 75% of the Turquoise Ridge mine which produced 135,000 ounces (4.21875 Tons) at a cost of $569 per ounce. Finally for the Turquoise Ridge mine, assume a profit of $700 per ounce. This would give a profit of $ 94,500,000.

    Barrick is actively exploring in the Carlin Trace in Nevada. The Carlin Trace is one of the richest gold deposts in the world. Barrick's annual report shows that 44% of the companies income comes from North America. Don't forget that Barrick is also mining silver along with the gold in Nevada. If you add all of the projected and conservative profits, the total is $2,884,300,000. This is a conservative estimate."

  8. Thank YOU, Patrick J. Coolican!
    The PROOF is rather damning towards the MINING industry, folks. For years, MINING avoided mandated audits by the State. They have had a free hand in writing favorable tax laws in the Nevada Constitution since day 1, and have kept politicians in their pockets since.

    But, alas, the People of Nevada, have awakened from their slumber and have begun to realize that the MINING industry has virtually exploited and raped the State of Nevada and it People, of its richest NONrenewable resources, its gold, silver, and rare minerals for a mere pittance! They (MINING) have NO shame, whatsoever. NONE. Take the money, and run. When there are no more minerals, they will pick up and leave us a MESS. "How?" you ask. By MINING having an army of lobbyists and attorneys who prey upon every Lawmaker and media outlet that can do them any kind of damage: accountability has been and continues to be dodged by MINING and its allies.

    Those Lawmakers who have been siding with MINING consistently best be looking for another profession other than being a elected representative, as the VOTERS of Nevada will have NO mercy on your kind. NONE.

    If Nevada has to, then it should take over the business of MINING, and put UNemployed Nevadans to work, and make the PROFITS, and let those PROFITS fund the STATE. If the current MINING industry kicks and whines, give them THAT alternative! Because we have seen and experienced how MINING owns this state, in the past and now. If MINING refuses to comply, send them packing and take over. We have the human resources to do this.

    Clearly, the State of Nevada infrastructure has had problems being adequately and consistently funded since day 1, and MINING, and those Lawmakers in MINING's pockets, carries much of the blame. It is long past time to make this powerful industry accountable and to pay its FAIR share to Nevada and its People. We have suffered enough!

    Blessings and Peace,
    Star

  9. Sorry, it should be "J. Patrick Coolican"!
    Change of time and not enough coffee has my mind spinning this morning. Even slept in. :) Star

  10. This is a facade in order to keep the small time prospector and miner out of the business of mining in Nevada.
    Nevada has huge untapped recourses in minerals and Geo- thermal underground potential. So, the big mining industries want to lock up all the BLM land for their use only. A small time prospector and miner make his living on luck and very difficult and labor intensive work. With any kind of tax on the small mining operator or prospector would completely cripple them because of the huge amount of time and effort that must be put in before any profit can be made. This is not about taxes it is a land grab by Barrick Gold and the other huge mining companies.