Modern mining began in Nevada even before the Silver State joined the union, and it was the state’s dominant industry for decades.
The framers even enshrined the industry’s favorable taxation structure in the Nevada Constitution in 1864, after an earlier attempt at passing a Constitution failed in part because mines would have been taxed the same as other businesses.
Mining supports about 29,000 jobs, according to research from the Nevada Mining Association, including about 11,000 direct jobs as well as 18,000 indirect jobs from companies that supply and serve the industry and 10,000 induced jobs from companies serving the direct employees through food service, health care and more. But while it accounts for a much smaller share of jobs than it did in Nevada’s earliest years, the mining industry is still a force on the international stage.
Nevada accounts for about 83 percent of the nation’s gold production, and is the fifth-largest gold producer in the world behind the countries of China, Russia, Australia and Canada. As of Thursday, the price of gold was about $1,800 an ounce.
In 2019, there were 103 mining operations in Nevada that grossed $7.8 billion.
The state’s mines are subject to a tax called the net proceeds of minerals.
That means companies start with their gross revenue, then subtract business expenses. Nevada law allows companies to deduct the cost of extracting minerals, repairing machinery and benefits for employees, among others.
In 2019, operators took $5.5 billion in deductions and reported “net proceeds” of $2.5 billion.
Those proceeds are taxed on a sliding scale at a rate of 2 percent to 5 percent, depending on how profitable the company was. The state’s portion is the remainder after the local tax is assessed.
In all, the state got about $61 million and counties got about $61 million in revenue from mining taxes in 2019.
Critics say mining companies aren’t paying their fair share to support state services, paying a low effective tax rate while permanently extracting materials from the earth and in some cases creating lasting environmental problems.
“This is our state, and they do things and it's not right, and you know it,” Democratic Assemblywoman Shannon Bilbray-Axelrod said at an Assembly floor session on Wednesday. “And it's high time they pay. And this isn't the end of it."
Groups such as the Progressive Leadership Alliance of Nevada want some of the allowable deductions, such as marketing costs, removed from the law so more of their output is taxed, and they also want mining’s tax cap taken out of the Constitution so it can be changed. The latter would take several years — changing the Constitution requires votes from lawmakers in two consecutive sessions, then a statewide popular vote, meaning the soonest it could happen would be at the 2022 election.
But lawmakers have generally taken less dramatic steps to have the mining industry help with budget problems, such as asking companies to pre-pay their tax bills. A bill passed by both houses in the special session, SB3, calls on companies to make two payments at once to the general fund, to help with the immediate budget crisis.
Supporters of the industry argue that mining is singled out for prepayment of taxes and has become a scapegoat even though minerals are essential for everyday products, the companies support organizations in their communities and the industry offers well-paid jobs. Republican Sen. Ira Hansen was the most vocal opponent of making mines pre-pay their taxes.
"I think they would rather have me not say one word about it because they understand they have a significant PR problem in the state. And they would rather just pay it and act like they're very delighted to pay it,” he said on Wednesday. “But the truth is, we've held a gun to their head and that we have made them the whipping boy when in fact they're one of the best industries Nevada has ever had.”