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Issues & Policy

Taxation

The global financial crisis and subsequent state budget gap have made taxation policy in Nevada a high-profile issue. To atone for the budget shortfall and continue to provide necessary services to the state’s growing population, some interest groups and individuals have proposed an increase in taxes on business, specifically on mining.

Performance

In 2011, the mining industry:

  • Directly employed 10,700 people
  • Provided an average wage of $87,900 - more than double the statewide average.
  • Paid $941 million in employee compensation, which included health care for 97% of the workforce.
  • Created an additional 14,300 jobs in Nevada providing goods and services to the industry.
  • Generated over $7.8 billion in total economic output, including both direct and indirect effects.
  • Paid over $417 million in state and local taxes.

Source: John Dobra, University of Nevada at Reno, 2011

The NVMA has consistently supported adequate funding for education, social services, and public safety programs, and believe that public needs should be sufficiently funded through a broad-based business tax. Currently, Nevada mines pay all state taxes that most other businesses pay plus an industry-specific property tax, the Net Proceeds of Minerals Tax (NPOMT). In 2002, the mining industry adopted the following tax policy, which the Nevada Mining Association stands behind today:

  • The Nevada Mining Association recognizes that Nevada’s state government faces future funding challenges because of its narrow tax base and increasing demands on state services caused by significant population growth. Under existing structures, the state’s general fund will not keep pace with these new demands for state services.
  • The association strongly believes that any new taxes must be broad-based, include all sectors of the Nevada economy, and apportioned according to the taxpayer’s ability to pay.
  • The state must not seek any new single-source taxes, such as new or increased taxes solely on the gaming, mining, or insurance industries.
  • The mining industry will pay its fair share of any new taxes in the same manner, and to the same extent, as any other Nevada business.
  • Finally, these new taxes should not be aimed at any individual citizens or companies, and appropriate safeguards or exemptions should be put in place to help Nevada’s small business owners.

The Nevada Mining Association is committed to working with legislators to address the budget shortfall and modify the state’s tax policy.

Economic Contributions

Mining’s contributions to Nevada’s economy are a key component of our collective corporate responsibility as an industry. We support economic development directly, through our operations, supply chain, and payment of taxes, and indirectly by stimulating broader economic growth. However, the cyclical nature of commodity prices and finite nature of the minerals we extract require that we work closely with our stakeholders to take advantage of the opportunities mining provides to create long-term, sustainable economic value.

Estimated Total (Mining and Non-Mining Specific)
Major Taxes Paid by Nevada Mining

Cash flow for prepayment of Net Proceeds of Minerals Taxes

Source: Applied Analysis, 2013

At a Glance: Mining Taxation

Mining companies pay three kinds of state and county taxes in addition to federal taxes. These include:

The Net Proceeds of Mines (NPOM) Tax, which has existed for decades and was increased from 3.65 percent to 5 percent in 1989. Mining is one of only four industries in Nevada with an industry-specific tax that must be paid in addition to conventional business taxes. More than half of NPOM tax revenue goes to the Nevada General Fund and is distributed on a per capita basis throughout the state. The remainder goes to the county in which the minerals were produced.

Property taxes, which are paid on property, plants, and facilities, stay almost exclusively in the counties and special tax districts where mines are located.

Sales and use taxes are primarily distributed throughout the state on a per capita basis, while a small amount goes to the state’s General Fund and to school districts statewide on a per pupil basis. Because modern mining is a capital intensive business that spends significant amounts on sophisticated equipment and supplies, sales taxes are the largest tax obligation for the industry.

Cash flow for prepayment of Net Proceeds of Minerals taxes

Cash flow for prepayment of Net Proceeds of Minerals Taxes

Source: Applied Analysis, 2013

Direct Contributions

The mining industry contributes directly to Nevada’s economy in a variety of ways: by providing jobs, paying state and local taxes, and purchasing goods and services from local suppliers and contractors. In particular:

  • Mining creates high-paying jobs. The average annual earnings for mining employees was $78,700 in 2009 ($81,800 in metal mining), as compared to statewide average earnings of a little less than $43,000.
  • Mining pays more taxes per employee than most other industries. On average, the industry pays more than $14,000 more in state and local taxes per employee than other industries. In 2009, mine operators alone paid approximately $204 million in total taxes (not including personal or corporate taxes paid by industry employees or suppliers).

Navigating the Financial Crisis

The financial crisis of the past few years has created economic uncertainty around the globe, as well as for Nevada and the mining industry in the state. State revenues have fallen substantially, resulting in a significant shortfall in the 2009-2010 budget that was addressed through deep cuts and significant fee increases. The mining industry contributed to these solutions through increased filing claim fees of approximately $25 million, and by pre-paying approximately $123 million in anticipated taxes from the four largest mining companies in the state. Continued increases in the price of gold, which represents nearly 88 percent of Nevada's gross proceeds from mines, also enabled the industry to make significant contributions to the state budget through the Net Proceeds of Mines tax.

At the same time, the financial crisis has also created difficulties for the mining industry. The recession deepened ongoing shortages of equipment and materials, and the prices of many industrial minerals from Nevada mines slumped. This decline in industrial minerals and mining services reduced economic output in the mining sector from $10 billion in 2008 to $9.5 billion in 2009, and employment in the industry also declined between 2008 and 2009.

Indirect Contributions

Mining operations in Nevada also generate significant indirect economic impact, creating economic growth in businesses outside of the industry’s direct supply chain, and developing infrastructure and services in communities around the state.

  • To develop or expand mines, mining companies make investments in infrastructure and services that can also benefit their host communities. Mines also often bring enhanced telecommunications infrastructure, particularly to rural areas, which lag behind more urban parts of the state in their access to high-speed communications.
  • Through the influx of workers associated with new and expanding mines, mining also stimulates the growth of the housing industry and related trades in rural towns where employees live. In many cases mining companies have provided assistance to employees for home purchases. Some companies have pursued innovative initiatives to ensure adequate housing for employees. Newmont, for instance, struggled to find adequate housing for some of its employees in Battle Mountain. Through a four-party agreement with county officials and the Lander County Economic Development Authority, Newmont helped renovate a trailer park that provides housing for employees and community members, helping to stabilize tax revenues for the county and stimulate local business.
  • The presence of mining operations stimulates growth of local businesses, even those outside mining’s direct supply chain. As workers relocate to take jobs, they generate demand for goods and services such as retail, service providers, entertainment, and recreation. This business growth creates additional jobs and can attract other long-term industries.

Long-Term Economic Sustainability

While mining has played, and will continue to play, a significant role in Nevada’s economy, we share our stakeholders’ concerns about economic dependence on the industry. Mining is a particularly cyclical industry, creating significant growth when mineral prices are high, but also periodically undergoing significant downturns resulting in elevated unemployment, lower tax revenues, and economic contraction. These impacts are felt strongly in rural communities where mining is a significant economic engine.

We believe that the solution is in diversification through the attraction and growth of other industries that require similar skill sets. These complementary industries, such as manufacturing, construction, and renewable energy, can absorb excess workforce capacity and create diversified economic growth in Nevada. Our industry is committed to working with our host communities, business partners, and other stakeholders to address these concerns and look for opportunities to stimulate long-term, sustainable growth during downturns and beyond mine closure.


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