William Douglass: Is the mining industry really paying its fair share?

How I would have loved to have had Mr. Douglass down in Carson City at the Taxation Committee hearings today!

-maven

Is the mining industry really paying its fair share?

by William Douglass, Reno Gazette-Journal

I am in the casino business, and it is no longer on the proverbial roll. Gaming results for the last three years provide a litany of downward spiral. Last fiscal year, my industry booked an unprecedented $6 billion loss. Nor is gaming likely to snap back since virtually every state and Indian tribe now has gaming in some (or all) forms and the epicenter of the industry has shifted to Asia. Our former near-monopoly and leadership are simply gone forever.

Mining is a different story. Gold values soared. Mining companies now post record profits. I am pleased that we are not experiencing a mining depression along with the other one. Yet I question whether mining presently pays its fair share in taxes.

Unlike my industry, mining shrouds itself in 19th-century tax law designed to develop a frontier rather than serve the needs of our matured society. Mining declares its own deductible operational costs. We recently learned that mining’s claimed expenses are not even being audited by the state.

Consider the tax contributions of our two biggest industries and then compare them to their respective counterparts in other places.

According to the Nevada Mining Association’s own reporting, between 2000 and 2007, the mining industry extracted a bit more than $25 billion worth of gold in Nevada, deducted 78.5 percent as expenses, declared a little over $5 billion in revenue and paid about $125 million in taxes — or an effective tax rate of one-half of one percent of gross product. Even after adding back county and municipal taxes paid, the Nevada Mining Association places the taxes on its industry at less than 4 percent of profits (that would translate into about 1 percent of their gross).

Nevada’s casinos pay a 6.75 percent tax on pre-expense gross and about another 1 percent in other taxes, or about 7.75 percent overall — a tax rate that is roughly eight times higher than that of the mining industry.

Nevertheless, Nevada’s gaming taxes are the lowest in the country (excluding tax-exempt Indian casinos). In New Jersey, the rate is 9.25 percent, in Missouri 21 percent, and in Illinois 33 percent. Whether the gaming industry pays its fair share in Nevada can be debated. What cannot is that many casinos are underwater and might close with or without additional taxation.

Meanwhile, contemplate what is happening with mining. Last summer, Julia Gillard, the Australian prime minister, concluded an agreement with the country’s mining industry to pay taxes and royalties at a 30 percent rate, a concession to the industry since her predecessor, Kevin Rudd, sought a 40 percent tax on mining’s “super profits.” In South Africa, mining pays 37 percent in taxes and in Brazil 20 percent.

So, the next time you hear that tax increases will force mining out of Nevada, ask the question, “To where?” Then ask yourself if an effective royalty of one-half of one percent for the removal of Nevada’s nonrenewable mineral wealth by mainly out-of-state (when not foreign-based) financial interests is “fair?”

William Douglass is a Reno native, casino owner and professor emeritus at the University of Nevada, Reno.