The price of gold has been rising more quickly this week than any week since it started its covid-spawned climb in March. It opened Monday at $1,808. It closed Thursday at $1,883, after trading within $1.30 of $1,900 earlier in the day.
What? Just because Nevada failed to increase mining’s tax burden during this month’s special session of the Legislature, you thought we didn’t need to pay attention to the price of gold anymore?
True, thanks to the way Nevada taxes, or fails to tax, gold, price fluctuations mean very little to the state’s general fund revenue. Even when it hits $2,000, as mainstream analysts (and not just gold bugs) predict, the additional state revenue in one year would total — and this is just a wild back-o’-the-envelope guesstimate — maybe $35 million. That’s more or less the same as about three weeks’ worth of state insurance tax revenue.
Not only did Nevada fail to increase mining tax revenue during the special session, Nevada evidently won’t use a second special session to get a head start on a constitutional amendment to strip mining’s super-strong protections from taxation out of the constitution.
Democrats and their allies have been making much ado about two-thirds, which is the proportion of lawmakers needed in both houses to raise taxes, and the proportion Democrats couldn’t meet in the Senate. Hence, no mining tax action this month, small as the proposal was.
But accelerating the timeline so a constitutional amendment would go before voters in 2022 is something Democrats could do with only a simple majority vote. Alas (as I explained in June), they would have to approve a proposed constitutional amendment by Aug. 3. While that may be technically possible — neither the laws of physics nor even the Nevada constitution preclude the governor and Legislature from acting that quickly — there is nothing about current gubernatorial or legislative leadership to indicate even the most remote chance that it’ll happen. If and when Nevada voters take mining’s tax protections out of the constitution, it won’t be until 2024 at the earliest.
By that time, billions of dollars of profits from high-priced gold will have just cold flown out of the state, untaxed, and the economy will have made something approaching a recovery, hopefully, so the price of gold will fall again.
Wait, there’s more.
There is another means by which schools, health services and other public programs could benefit from gold’s price boom. Some congressional Democrats are backing legislation to establish a federal mineral royalty on gold and other so-called “hardrock” minerals mined on federal lands. Under the legislation, a quarter of the royalty would be returned to the state where the mineral was mined.
Nevada’s economic response to the covid crisis has consisted primarily of hoping Congress will come to the rescue. Maybe that’s what it will take for Nevada to get more money from mining, too.
Alas (again), that legislation has no chance of passing until Democrats control both the U.S. House and the U.S. Senate and the presidency — and maybe not even then. You think former Sen. Harry Reid was good at thwarting Yucca Mountain? He was even better at bottling up federal mining law reform. It would be nice to believe his Nevada Democratic successors have a different approach to the issue. Nice. And naive.
The price of gold hit an all time high of $1,920.70 on Sept. 6, 2011.
Maybe tomorrow, maybe next week, or next month at the latest, the price will set a new record.
And here in Nevada, the state that is far and away the nation’s leading gold producer, it won’t mean a thing.