Nevada mines produced $7.8 billion worth of minerals in 2018.
Mining taxes were paid on less than a third of that amount.
And after taking advantage of tax deductions Nevada so foolishly but generously allows, operators can whittle down their state mining tax bill to almost — or even absolutely — nothing.
Nevada mining tax policy, you see, is a farce.
Of the 28 producing mines in the state last year, seven of them, accounting for $327 million worth of gold, paid zero taxes to state coffers.
Several other mines, including the state’s second and third largest, very nearly wrote off their entire tax bills.
Newmont Mining Corp.’s Carlin Trend project produced just over a billion dollars’ worth of gold, but deducted expenses of nearly $900 million.
At Barrick Gold Corp.’s Goldstrike property, $955 million worth of gold was mined, and $773 million was taken in deductions.
All the figures listed above are from the Nevada Tax Department’s annual Net Proceeds of Minerals Bulletin, the most recent version of which was published in June.
In total, of the $7.8 billion worth of minerals produced in 2018, about $50 million, a paltry six-tenths of 1 percent, ended up in the state’s general fund to help pay for schools, health and social services and all the other programs and public responsibilities that Nevada perennially, persistently and perniciously fails to adequately fund.
Counties where the minerals were mined did a little better. Their share of the mining tax was $64.8 million. (Some mineral producers that pay no state taxes usually pay at least a little something to counties).
Combining a tiny rate and gratuitously generous deductions, Nevada’s mining tax policy is an assault against Nevadans whose public services languish while the world’s largest mining corporations send billions of dollars in profits to shareholders around the globe.
Nevada’s constitution caps the industry’s tax rate at 5 percent of “net proceeds.” The industry, enabled forever by housebroken Nevada elected officials, has aggressively embraced the word “net,” deducting nearly every available expense, and paying taxes only on whatever value is left over.
If there is any.
The Jerritt Canyon mine, an underground project operated by a privately owned Toronto-based company, is one of the operations that paid no mining taxes to the state general fund in 2018.
The company paid nothing to the state in 2017 either.
Over those four years, more than $622 million worth of gold was produced at Jerritt Canyon, and the state’s general fund didn’t see a dime of it.
Several other operations go year after year without paying any state taxes. Most of them are pretty small, and at some, production is negligible — less than a million dollars a year. An exception is the Florida Canyon project, owned by Vancouver-based Alio Gold Inc.
In the four years from 2015 through 2018, Florida Canyon produced gold worth $135 million, of which the state of Nevada got exactly jack doodley squat.
Gold miners aren’t the only ones paying nothing — or close to it. There is one active copper mine in Nevada, the Robinson project owned by the Polish corporation KGHM. The mine took deductions totaling more than 85 percent of mineral value in 2018. On production of more than $382 million, KGHM ended up paying $763,000 to the state general fund, or less than two-tenths of one percent of value.
The net proceeds tax also applies to the gypsum and geothermal industries. The state general fund got nothing from either in 2018.
But of course gold (with a little silver thrown in) is where the money is, accounting for 90 percent of the $7.8 billion in Nevada mineral production last year.
Newmont and Barrick account for 70 percent of Nevada gold production. After years of squabbling, the two corporate global mining giants agreed in March to combine their Nevada operations.
The two were already in partnership at the largest gold mine in Nevada and one of the largest in the world, the Cortez mine. A relatively new mine, with comparatively accessible ores, expenses at Cortez are, on a percentage basis, low compared to the statewide average.
And, compared to the statewide average, so are the deductions at Cortez. While the mining industry as a whole took deductions worth 70 percent of the value of minerals, Cortez only deducted half the value. Of $1.6 billion worth of gold, Cortez effectively paid state taxes on $800 million.
Which of course means it didn’t pay state taxes on the other $800 million.
While the mining tax rate is in the constitution, the deductions aren’t. They are in state statutes. Legislators can change them.
Legislators tinkered with deductions as recently as 2013, explicitly disallowing several expenses, including the cost of lobbying legislators.
While scrambling for money earlier this year, the governor and the Legislature might have turned to the 13 categories of deductions in state statutes, with an eye toward eliminating two or three (or six or seven).
Mining would have called it a tax hike requiring a two-thirds vote of both houses. Problematic! But addressing Nevada’s horrible no good very bad mining tax policy was never going to happen anyway, because Gov. Steve Sisolak started the session declaring there would be no new taxes. Ultimately he circumvented that promise when he and the Legislature authorized counties to raise the sales tax.
Well, it is politically easier to raise taxes on poor people who don’t have lobbyists than on powerful industries that do. Maybe next time.
In 2014, voters rejected a constitutional amendment that would have removed the 5 percent cap on the mining tax. The 2014 election cycle was a fluke. Democrats failed to give voters a reason to show up, so Democratic voters didn’t. The amendment still failed by less than 5,000 votes out of 535,000 cast.
This year, Democrats passed several pieces of legislation deliberately reversing policies that were the result of that election. In retrospect, we all should have been calling on lawmakers this year to fix still more 2014-related weirdness, relaunch the mining tax amendment, and get it back on the ballot.
Eliminating the 5 percent cap and axing some of mining’s tax deductions would not make Nevada’s budget flush and lift the state from the bottom of all the good lists.
But just as the resort industry has squelched talk, in polite circles, anyway, of increasing Nevada’s lowest-in-the-nation tax on casino revenues, the mining industry has happily (from its point of view) been spared any serious move by politicians or policymakers to put the mining tax back on the table.
When the constitutional amendment failed in 2014, Nevada’s mining tax system didn’t suddenly become better policy. It’s still horrible policy. It’s past time for Nevada to do itself a favor, and fix it.