By Ray Hagar, Nevada Newsmakers
A controversial bill that would increase taxes on major mining companies in Nevada — by limiting their tax deductions to 60 percent of normal — fell one-vote short during the recent 12-day special session of the Nevada Legislature.
But the Democrats’ push to limit mining tax deductions to increase state revenue will be a priority when the Legislature meets in its 2021 regular session, Assemblyman Steve Yeager, D-Las Vegas, and some key lobbyists said on Nevada Newsmakers this week.
“We started that discussion (on capping mining deductions) and I anticipate in the 2021 session we will continue that discussion,” Yeager told host Sam Shad. “Because from voters I have talked to, they don’t feel like mining is paying their fair share of taxes because of constitutional protections and otherwise.
“And I can’t say I disagree with that,” said Yeager, the chairman of the Assembly Judiciary Committee and Speaker Pro Tem.
The mining deductions cap would have added more than $100 million to Nevada’s tax revenues if it would have been approved during the special session.
When lobbyist Jesse Wadhams heard what Yeager said about bringing up the mining deductions cap in the 2021 session, he chuckled. Then said, “I would say that is probably an understatement.”
The Democrats’ strategy is laid out for the 2021 session, Yeager hinted.
“So we will continue with the (mining deductions cap) discussion through the next session to see if we can find something more equitable,” Yeager said.
The 12-day special session that ended Sunday was called by Gov. Steve Sisolak to make $1.2 billion in cuts to the state’s general-fund budget because it has been severely squeezed by the economic fallout of the COVID-19 crisis.
Lobbyists received just a few-hours notice before the mining tax bill dropped during the special session, said Wadhams, a partner in Black and LoBello, Attorneys at Law. They were at a disadvantage to counter it since lobbyists, many media representatives and members of the public were barred from entering the Legislature building because of the COVID-19 crisis.
Yet they were not totally surprised, since taxing mining is a constant theme in a Legislature with Democratic majorities in both houses.
“Mining taxes are always out there,” Wadhams said. “It is a thing you’ve always got to be thinking about because it is always getting discussed.”
Remembering Peggy Pierce
Closing the gap on mining deductions has become a crusade for many Democrats. They have attached the name of former Assemblywoman Peggy Pierce to the cause. Pierce, D-Las Vegas, championed the unsuccessful push to limit mining deductions during the 2011 session. She was the District 3 representative in the Assembly from 2002 to 2013, when she died of cancer at 59.
“I think the reason that (mining deductions cap) came about was that our (Assembly Democratic) caucus really felt strongly about the need to raise additional revenue to try and mitigate some of these cuts,” Yeager said. “And when we started looking at some ideas, this was not a new idea. It was brought in 2011 by the late Assemblywoman Peggy Pierce. So the good news was that the bill was already drafted. It was pretty easy to just revive that.”
Yeager also pushed back on the idea that the mining industry was left in the dark about the tax plan.
“I know the Speaker (Jason Frierson) gave some of the mining folks a heads-up that it was coming,” Yeager said. “They may not have gotten as much of a heads-up as they would have liked. But we, as a caucus, looked at the budget and we said we had to try and do something to raise some revenue — something realistic in terms of the special session.”
Nevada law states that any tax increase, like the mining deductions cap, needs a two-thirds approval from both houses in the Legislature. That was easily attained in the Assembly, where Democrats hold the super majority. Yet is failed in the state Senate by one when 13 Democrats voted for it and eight Republicans voted against.
The way that Democrats singled out mining and quickly pushed the deductions cap could lead to bad tax policy in the future, said Bryan Wachter, the senior vice president of government and public affairs for the Retail Association of Nevada.
“If the Legislature wants to take a look at tax policy, they have every right to do so,” Wachter said. “But you need to do so outside of a special session. And you need to do it with as broad of a coalition as possible.
“You should bring in stakeholders from every industry, not just mining, and have a conversation about the revenue you need and where it needs to go,” he added. “I mean it is very bad tax policy when you start putting ongoing programs and operations onto a commodity-based industry, for one. And two, when you put it on any single industry.”
Some businesses are concerned that the push for a single-industry deductions cap could be a preview of how the Legislature may do business in the future.
“Our (Retail Association of Nevada) members are really afraid of this,” Wachter said. “Is this the attitude toward business that the Legislature is going to have? Does it end with mining? Is a retail tax next? So this is something that certainly has us on guard and something that we’ll be looking at coming into 2021.”
Mining was the state’s primary industry when Nevada became a state in 1864. It was influential in writing the Nevada Constitution, which limits the tax on net proceeds of minerals at 5 percent and allows mining to take deductions on extraction, processing, marketing and delivery.
Changing the constitution to raise the tax on mining’s net proceeds in a long, arduous process that would include general-election voters and the Legislature. That is why Democrats efforts will center on efforts to change statutory law on deductions, Yeager said.
“That (change in constitution) is one way to do it because there is the constitutional amendment in terms of what the tax rate is,” Yeager said. “But what they can deduct before that tax rate is applied is a statutory element. So we were able to do that through the bill and as you saw, we passed it in the Assembly and then all kind of things happened when it went to the senate, where it looked like it was going to pass and didn’t. So that was disappointing.”
No gaming tax increases
While mining was singled out for a tax increase, there was nary a peep from Democrats about raising taxes on Nevada’s gaming industry. Nevada’s gross gaming tax of 6.75 percent is the lowest in the nation. However, Nevada’s effective tax rate is closer to 7.75 percent because of added fees but remains the lowest in the U.S. The Nevada gaming industry also pays a litany of other taxes such as business and payroll taxes, sales taxes, liquor taxes and cigarette taxes.
Yeager said he was not part of any talks about raising gaming taxes.
“I was not involved in any discussions where that idea came up,” Yeager said. “But I can’t speak for others. The only one I was directly involved in was the mining (tax) and that one actually was brought and passed. ”
Nevada’s gaming industry is currently suffering due to the COVID-19 crisis and was not a good target for a quick bill to increase taxes in the special session, said lobbyist John Sande IV, principal, Argentum Partners.
“Mining was a relatively easy industry to pick on because of their counter-cyclical nature, where when the economy is not doing well, the price of gold goes up,” Sande said. “And so, gaming was not really discussed as much because they have been shut down for two-and-a-half months … So I don’t think adding a (gaming) tax would have made a lot of sense.”
State workers saved
Some Republican lawmakers felt state workers got off too easily when it came to budget cuts. Sisolak had recommended state workers take one-day off, each month, without pay for 12 months. He also recommended freezing state workers’ merit pay and laying off 28 workers.
Yet Democratic lawmakers disagreed and restored merit-pay increases, eliminated the proposed layoffs and cut the furlough days from 12 to six.
The Nevada Independent’s Riley Snyder reported on Twitter that AFSCME, the union that represents state workers, donated about $250,000 to Democratic “candidates, PACs and caucuses” in the three months leading up to the special session, citing campaign finance reports.
State Sen. Heidi Gansert, R-Reno, told the Nevada Independent that many workers in the private sector have lost their jobs in the recession. Nevada’s unemployment rate was at 15 percent in June, after hitting 28 percent earlier in the recession.
Yeager defended state workers.
“We control the state budget,” he said. “We don’t have control over the private sector. The private sectors are going to make the decisions that they make but I feel as a state legislator, we employ these folks in the state. They work extraordinary hard. We have a very lean state government. In terms of state employees per population, we are one of the lowest in the country.”
When the state lacks enough state workers, the general population suffers, Yeager said.
“We have to keep them whole,” he said. “If state employees get laid off, that’s going to have a real impact on services in our state. Take the Department of Motor Vehicles. You are laying people off and it is already difficult to get in.
“So I think that folks out there who are skeptical have to think about the impact to critical services in our state,” Yeager said. “It is just crucial to have them keep working and employed. I can’t speak to the private sector. Obviously I am sympathetic to what everybody is going through but as a state legislator, we have to look out for the folks who are providing services to all Nevadans. They (state workers) are going to share some of that pain because there are six furlough days on the table. But I feel very good about what we’ve done, given how lean the state government is.”
Sande called the special session “surreal,” an adjective that was also mentioned by the other lobbyists.
Few winners emerged, he added.
“Coming out of this special session, I wouldn’t think that there is any special interest group that felt they got a win,” Sande said. “This is a very difficult time for everybody.”
Wachter, watching from Las Vegas, said the session seemed a bit disorganized.
“It was also the first special session that we’ve seen where there didn’t seem to be kind-of a plan already in place,” he said.
If the governor were to call a second special session, Wadhams suggested lawmakers would probably do more homework before the session started.
“I do think the 12 days of this legislative session that we’ve just saw certainly indicate that we need a little more time to bake the cake before we can get in there and do more policy,” he said.
Yeager pushed back on any perceived disorganization.
“What the public doesn’t see, is when we go into a regular session, the budgeting process is about six months long,” he said. “The governor’s staff is preparing the budget and when the Legislature gets it, we take the whole session.
“So when you think of it, it takes about six months to prepare our state budget,” he added. “And we came in here, in 12 days, we had to deconstruct — then reconstruct — the entire state budget. When you look at it that way, we actually worked very efficiently.”
Wadhams said it was a session to remember.
“It had almost everything,” Wadhams said. “It had tax fights. It had surreal moments, technology issues and the lack of the ability to be in the building.”