Maybe — maybe — Democrats could have put a bit more thought into how they were going to tax mining than I put into writing my columns before the start of this session.
I’m asking for more than people think, believe it or not, but still — there’s 63 of them and only one of me. They have the advantage of numbers and lobbyists on speed dial. I just have an entry-level cable internet connection, a six-year-old laptop, about 12 hours until deadline, a dozen tabs open and a couple of the best editors on Earth who futilely try to keep my thoughts linear and coherent.
Let’s start with the first problem — apparently the two houses of the Legislature, despite being ostensibly run by the same party, don’t know how to communicate with each other.
AJR1 and SJR1, the two proposals to amend the Nevada Constitution to raise mining taxes, have a few things in common. Both raise the mining tax rate from 5 percent of net proceeds to 7.75 percent of gross. Both explicitly allow simple majorities for raising future mining taxes. Both require two-thirds majorities for any reductions in mining taxes, poetically turning current Nevada taxing law (which allows simple majorities for tax cuts and requires two-thirds majorities for tax increases) on its head. Both, if approved, will take effect no sooner than Jan. 1, 2023.
These commonalities suggest some collegiality went into identifying both how and how much mining should be taxed. Perhaps an email or two were sent. Perhaps a few legislators from each house even launched Teams and shared a Word document. Stranger things have certainly happened, I’m sure.
What most certainly wasn’t produced from this undoubtedly rigorous collaborative process, however, was a consensus on what the money should be spent on.
The Assembly thinks that 25 percent of the money should be spent on education and health care and economic assistance, with the remaining 75 percent being spent on free ponies or something (the resolution doesn’t say, so use your imagination). The Senate, on the other hand, apparently thinks such notions are reckless and foolhardy. Instead, they propose to spend 50 percent of the gold-plated windfall on a dividend fund that will directly pay Nevadans, similar to how the Alaska Permanent Fund pays Alaskans from oil proceeds generated in their state. The remaining 50 percent, meanwhile, will be spent on mandatory toothbrushing measures and clean, renewable zombie power plants — or something.
The two august and distinguished bodies, unable to recognize that 50 percent plus 25 percent is still less than 100 percent and that they can both get what they want if they simply communicate with each other at all — literally at all, just one email. How hard could this have been to straighten out before driving all the way to Carson City? Surely someone on the Technology Caucus knows how to pair their phone to their car via Bluetooth so they could talk this over for a few minutes while finishing their drives to the Legislature —
Okay, yes, admittedly they came up with a compromise — both houses are going to vote for both of them and figure out which one they like better next year. That sounds like an efficient use of time.
Let’s… let’s just move on to the second problem.
The second problem is that apparently nobody in the Legislature bothered to check what taxes other states levy on mining operations. Lest anyone suspect the provenance of the Erwin Thompson Faillers exhibit submitted to the Assembly, the U.S. Government Accountability Office did indeed issue document B-330854, it does indeed summarize the royalties and taxes levied by each state in the country on mining claims, and it’s true — there isn’t a single state in that document that taxes all mining activity in their state at anywhere near 7.75 percent of gross proceeds.
To summarize the summary, only five states tax gross proceeds:
- Arizona: 3.125 percent
- Colorado: 2.25 percent of gross income above $19 million a year
- Montana: $25 plus 1 percent, though limestone is taxed at $25 plus 10 percent
- New Mexico: 0.125 percent of taxable value, which is gross income minus state and federal royalty payments
- Washington: 0.48 percent
The closest any state comes to reaching 7.75 percent is Montana’s 10 percent tax on limestone mining; more generally, Arizona’s 3.125 percent gross receipts tax, which is still less than half of 7.75 percent, comes closest overall. California, well-known for its pro-mining low-tax business environment, levies a unit tax of $5 per ounce of gold, which, at current market prices of over $1700 per ounce, works out to less than 0.3 percent of gross.
This suggests that the 7.75 percent number didn’t come from a careful analysis of publicly accessible company financial reports and previously implemented gross proceeds taxes in other American jurisdictions. Instead, if it came from anywhere at all, perhaps it came from a cursory glance at Nevada’s current statewide 6.85 percent sales tax rate, followed by a sense, undoubtedly fueled by the fact most counties tax well above that, that less than 7 percent still felt a little too low.
In other words, it came from the gut, pulled through the orifice of your choice. Up or down, take your pick.
Put less scatologically, the Legislature needs to show its work -- 7.75 percent of anything doesn’t sound like a large number in the abstract, but it’s far more than any other state is levying. If we’re going to bake that number into the Constitution and make it impossible to decrease without another amendment (which would take a minimum of three years to pass and enact), we should make sure it’s a reasonable one.
The biggest problem of all, though, is both measures make bad problems infinitely worse.
One problem is mining taxes — or their prohibition — don’t belong in the Nevada Constitution. The solution to that is to amend mining out of the Constitution, not to constitutionally punish mining instead.
What also doesn’t belong in the Constitution is gamesmanship with the size of majorities needed to change legislation passed by previous Legislatures. This is true for the two-thirds requirement to pass tax increases, which only seems to exist to give Republicans the ability to stop tax increases when they’re not in power, and would be every bit as true for two-thirds requirements to pass tax decreases for industries that don’t hire Democrats as well.
Don’t get me wrong, speaking as a twice-divorced 40-year-old, I understand the appeal of getting even — and that’s what this is. It’s getting even for the Pickard Maneuver and the payroll tax lawsuit. An actual solution is to make the case for amending the two-thirds requirement for tax increases out of the Constitution, not engaging in tit-for-tat games that lock large portions of our tax code into a document that takes two sessions, a public vote, and a minimum of three years to amend every time something goes wrong.
It’s honestly not even a hard case to make. From an anti-tax standpoint, it’s impossible to argue the requirement has helped anything. California has a similar two-thirds requirement — how low are taxes over there? Did the two-thirds requirement prevent the passage of the largest tax increases in Nevada’s history in 2015? At some point, public policy can’t just mean well. It has to actually produce the desired results.
Keeping taxes low used to be quite popular in Nevada — before doing so only had to appeal to a third of Nevadans. Now it’s lazily packaged with a bunch of undesirable cultural baggage, half-baked conspiracy theories, and cult-like veneration of illiterate blowhards that most Nevadans dislike even more than we reflexively dislike sending money to Carson City. Why argue that low taxes increase prosperity when you can instead claim the government is using tax money to ship child brides via online furniture stores (or whatever the latest conspiracy theory is these days)? As long as you only need less than a dozen other legislators in Carson City to agree with you to keep taxes low, who cares?
Well, I care. I like my taxes low; I’m tired of watching the defenders of low taxes grow lazy in the warm glow of political protectionism; and I’m tired of watching Nevadans pay for the consequences.
SJR1 and AJR1 are going to pass through the special session with flying colors. That’s probably inevitable. That doesn’t mean, however, they’ll pass in 2021 or 2022, and it definitely doesn’t mean they should.
Instead, let’s encourage the Legislature to do something smart for a change, just to see what it feels like. Write mining out of the Constitution. Remove the two-thirds majority requirement for anything tax-related. Then settle this in Carson City where obvious mistakes don’t take years to correct.
David Colborne has been active in the Libertarian Party for two decades. During that time, he has blogged intermittently on his personal blog, as well as the Libertarian Party of Nevada blog, and ran for office twice as a Libertarian candidate. He serves on the Executive Committee for both his state and county Libertarian Party chapters. He is the father of two sons and an IT professional. You can follow him on Twitter @DavidColborne or email him at [email protected].