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Mining Taxes: Pro-Nevada or Anti-Industry?

Gold In NevadaMy politics are irrelevant in an opinionated world, this much is true. The chances of me changing the mind of the masses, organizing some mass movement or “making a difference,” is better left to those who have the gumption, megalomania, or true heart and grit required. My only real purpose for bringing any of this up is for thought and discussion. I’d like it to not turn into an “us,” or “them,” discussion, because as I outlined in my article “Quick-Fix Politics: The War Against Politeness,” there’s enough battles occurring out there to suit-up and engage within.

I can tell you that I grew up in a “mining family,” my father a relatively well-known exploration geologist, and so I ended up exploring and falling in love with Nevada. I was being raised by money provided by mining companies, most of them not large producers, but small independent offices (which makes up for a number of start-up business in Nevada, I might add). Recently, because of the upsurge in precious metal prices, a lot of companies, smaller ones mind you, are gearing up to go out and look for gold-up-in-them-thar-hills. I likely will be learning a new trade and aspect of this business, because the time is right for it. The prices for metals are at an all-time high, and I believe many people could benefit from this state’s most important export. That’s right, mining. It produces something that dwindling casinos, warehouses and brothels can’t really sustain: A product.  A product used especially in electronics, every iPhone, Prius, laptop and flat-screen television.  Not always bullion, coins, rich-guy/gal bling and Goldschlager.

The purpose of this, and probably subsequent articles, is going to tackle what I believe is an industrial opportunity for Nevada. Unfortunately, there are those that also find this area profitable, if not via cash, possibly for ego.

I am an admitted capitalist. Even though it isn’t a political process, nor a government, I still like to vote that way every time as if it were. I like money, it’s a great tool to give anyone in the Western world the ability to have more choices. I do not dream of bathing in it, using it to light cigars or dangle it above poor people and watch them dance. In fact, it might surprise you to know I’m quite below the poverty level myself. I have not accepted the defeat suggested by some that I will never succeed. I feel I have made a life of destroying the expectations of negativity that people have placed on me. Much like one of my life-heroes Christopher Gardener, there’s a dream that comes from self-fulfillment that I believe in whole. Money and success isn’t just a lofty dream, it’s a path for something to do. I hate sitting idly by, I detest having nothing to do, and I gain a sense of pride from my work.  Work I’d like to be paid for!

I recently have been watching the initiative Bob Fulkerson, adjunct professor at the University of Nevada, Reno, and an organizer of a group entitled “The Progressive Leadership Alliance of Nevada,” (PLAN) has put forth, namely the Nevadans for Fair Mining Tax. Now, to me, the word “fair,” creates descriptive notions: there’s carnies and ring-toss games involved, or there’s a guy selling me a car in which the word has come before his name. In other words, I’m skeptical. Just the title makes me focus in a little more, because well, I like mining, and I like Nevada, and from what I understand from the Nevada Mining Association, things aren’t so bad. I’d love to see more revenue being generated for everyone, that includes more productivity, which of course,  equals more taxes paid, even if it’s being suggested 5% isn’t enough.

From what I’ve observed in Nevada’s very recent mining activity, there’s a lot of interest in the area again. Because the economic climate is still dire, there’s still no money.  Sure, gold is in a four-figure position, but you have to get it somehow, and that takes generating revenue.  Revenue that isn’t local, and isn’t being seen nationally.  As I’ve also seen, economically-speaking, America is one of the last ones to the table of recovery, and so a lot of foreign investors are taking an interest in many things here: not just mining. Deals can and will be made.

Fulkerson’s idea seems questionable. We want to put Nevada to work, even generate taxes, but who’s money are we supposed to take? No one wants to be “owned,” by someone other than their own (Americans, Nevadans) but there’s plenty of ways around that, like contracts, and ultimately, getting ourselves financially strong.  Not to mention, there’s been about six decades of foreign influence in so many aspects of life today, being “pure,” in any colloquial American sense is kind of done and over. It’s okay though, no other country is pure either, except maybe North Korea, and I’m not going to use them as an example of utopia any time soon.

Most of these foreign influences that are taking billions of dollars in profits from Nevada paid for much of Nevada, too. $6.1 billion total in 2008, according to the state Division of Minerals, roughly $3.3 billion in 2008 exported Nevada total precious metals according to US Census — gold mining produced $4.97 billion of the state total.  They didn’t just come in here and steal it. If by “foreign,” you mean Canada, sure, Canada is hugely interested in Nevada gold, primarily because the Canadian tax and stock market structure allows their companies to more easily raise high risk capital.  This is required for gold exploration and development, and Nevada gold mines have a strong track record of being large and quite profitable.  This is still money being invested, spent and taxed in our state.

Obstructions of opportunities are the thing I am concerned about, which makes me question the genuineness of Fulkerson’s play for his idea of Nevada and taxes. Fulkerson, from what I can find, has made a huge crusade not for Nevada, the desert or the people therein, but AGAINST mining. It would seem strange that someone so interested in generating revenue for Nevada would but years before, spearhead some of the largest environmental requirements upon Nevada mining, making it all but impossible to do business in Nevada. If you manage to have laws in place making it very difficult to get to the gold, of course 5% tax revenue caps put in place by current laws are going to look minute. Having an effect of reducing output yet raising the taxes seems backwards to me.

After the the new Governor Brian Sandoval gave the recent State of the State address, Fulkerson was quoted asking: “If lower taxes meant more jobs, why are we leading in unemployment?” (RGJ/AP, Chereb 1/23/11) It’s a valid, if not empty, question, given the assumption jobs were possibly prevented from being generated in the first place. Of course lower taxes do not instantly mean jobs. There’s a strict balance of managing incoming and outgoing monies that require sensible people to manage in order for there to be successes, from small to large. I cannot, for example, cut my cable bill (an unnecessary “house tax,”) and then switch to part-time work and expect to get ahead financially. The Las Vegas Review-Journal via Ed Vogel also quotes Fulkerson: “This is not enough to solve the state’s budget problems,” Fulkerson said. “The idea is to stop an unfair tax situation. Mining has had a privileged status in Nevada since statehood.” So I am likely under the idea that the idea really is to be against mining, and not necessarily for Nevada.

This isn’t to speak light of environmental practices. We should do our best to not ruin our world. Aesthetics aside, I’m okay with leaving a hole in the ground provided it isn’t killing everything around it, and reputable mining ventures, be them small or large, are already required by law to do their best. Frequently, regulations seem to get tighter all the time. To what end, either to benefit something we perceive as silly, such as a new weed fungus species, or something important like keeping the water supply in a desert clean, that is for us to decide. Sensibly, there must be a point where we have to think about where a balance of industry and life can coexist.

Ed Vogel in the Las Vegas Review Journal writes much of I see as notable points. Such as there’s a lot of tax re-structuring that would help Nevada. Also, if taxes suddenly become the root of Nevada’s economy rather than a product, gold can and will be found elsewhere, such as Utah, Alaska and even other nations. This wouldn’t help Nevada. Since Nevada’s number-one export (gold) is also its most important export, and one of the top producers of gold in the world, Nevada really needs to get its hands dirty again. I can personally say I’d love one of the countless jobs being generated by such an opportunity.  Speculated is somewhere around 14,000 jobs according to NMA’s Tim Crowley, but I think there could be many more beyond that.

Apparently a few petitions are going to be circulating in the coming months, as they have been for a while, touting the “Nevada’s Fair Mining Tax.” The first step, from what I understand, is to change the Nevada Constitution to reflect wording that will make taxes on mining revenue not only high, but unchanging no matter the price of gold, productivity or output. Which of course, would simply drive investors, producers, workers and the like out of the state if left unchecked. I suppose if you dislike mining in every aspect, would rather people not have jobs in a state with limited opportunities besides low-wage casino sheet-flipping, almost nonexistent construction growth and weak trucking/warehousing, sure, sign it. I’ll be passing that one by knowing there’s nothing “fair,” about this tax besides a moral grudge against an industry led by an obviously smart, well-worded man with a bone to pick.

Telling people “no,” shouldn’t be a business or a mantra unless critically necessary; it’s bad enough being woven into politics and policy almost on a whim. Economies and societies are founded based upon opportunities. We, as smart individuals, know the difference between right and wrong, but we’re also fascinated with technicalities, wording, good sales pitches and the thrill of being on a “political team.” In my vision, restrictions, be they unreasonable laws of the person or forcing a punishable operating cost, as I call “obstructionism,” will lead us into a decay at the worst, or leave us in perpetual non-growth at best. I think mining companies should pay taxes, in addition to the jobs, community donations and financial security of the state. How much is enough will only be legislative at this point, but I really don’t want it to change at all if it means they pick up and leave.

(photo courtesy www.goldinvestingnews.com)

State of the State

Governor Sandoval delivered the 2011 Nevada State of the State address Monday night in the Assembly chamber in Carson City.  The speech was quite something.  The governor proposed a considerable number of things, many of his budget proposals seeming almost magical.  The reorganization of economic development for the state was sweeping and the education proposals bound to be controversial.  Many of the proposed cuts were not quite as draconian as many might have feared, but it was far from rosy.

Governor Morden’s Budget of The Shadows
Note:  Governor Sandoval did not play Mr. Morden on Babylon 5 in the 90s.  But gosh, doesn’t he look like Mr. Morden?  Also, we like the good governor, so don’t get your panties in a bunch.

The governor talked a lot in his budget about restructuring the way Nevada spends money – not the way it raises it.  He quoted Bill Gates at one point while talking about education policy.  The governor tried to avoid associating his policies with any given political ideology – probably not a bad idea.  His suggestions for using government-directed activism developing new industries certainly sounded like new thinking – I would have put those at the beginning of the speech.

In that vein, it was good to hear a speech laden with optimism and ideas.  It was bad to hear about how much less money the state has to spend, and will be spending.  On the university budget, for example, the governor said there were cuts of 7% which were actually, he said, 16.6% unless the regents raise tuition.  There were other cuts to local support for health and human services programs.  Through this, however, the proposed budget preserves the Millennium Scholarship, a program which is controversial among hardline conservatives and few others.

Another notable quote in the speech was from Abraham Lincoln, who said:

The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise with the occasion. As our case is new, so we must think anew and act anew.

Abraham Lincoln

Sandoval used that quote to frame the hard choices he claimed would be necessary to get through this crisis.  This was a speech vaguely reminiscent of Bob Miller’s speeches from the early 90s, during the recession then.  Miller also made a lot of cuts and some reorganizations.

One wonders how Nevada will fare in the coming biennium.  Will there be a special session in 2012?  There are many who claim the tax structure in the state is not set up right.  In partial response to that is an argument that the economy is primarily to blame for this crisis, and the tax system isn’t in need of much reorganization. 

At the end of the day, though, there is truth to the argument that putting people back to work is the best remedy for the current state of things.  If the unemployment rate doesn’t go down – if the economic development proposals bear no fruit – it’s hard to imagine how any argument can be made for more cuts to government services.  Nevada is in a compromising position.  Here’s hoping the state’s leaders can work together to help kick start an economic recovery.