Did Gibbons propose a mining tax hike?

Geoffrey Lawrence

One component of Governor Gibbons’ proposal to narrow the current $887 million budget shortfall is to raise an additional $50 million this biennium by eliminating a series of tax deductions currently claimed by the mining industry. This proposal has led local media pundits on both the right and the left to claim that Gibbons is resorting to tax hikes in order to balance the budget.

It is clear that Gibbons’ proposal would amount to a rising tax burden for the mining industry and, hence, can be considered an effective tax increase. However, it technically is not a tax increase. Anyone who claims Gibbons’ proposal is a tax hike misunderstands what that statement means. A tax increase means that the tax rate has increased or that a previously non-existing tax was levied.

Deductions, however, are highly politicized statutory exemptions from applicable taxes for engaging in certain behaviors. Usually, deductions are either the result of legislative ambitions for social engineering or successful lobbying efforts from privilege-seeking industries. (Regardless of what Gibbons says, however, they are not “inadvertent loopholes.” They are purposefully defined statutory provisions.)

The foremost national authority on tax policy, the Tax Foundation, puts it best:

Those loopholes, called “tax incentives” by their lobbyists, are the enemy of tax reform. Some politicians, lobbyists and pundits will cry “Tax hike!” at the loss of their special tax breaks. And eliminating them does raise revenue, but the all-important distinction is that these base-broadening measures do not raise the statutory tax rate. In fact, they pave the way for a lower statutory tax rate, decreasing distortion in the economy and improving the stability of government’s revenue flow.

As the Tax Foundation highlights, the elimination of special exemptions should be regarded as a positive move on the path to tax reform that simplifies the tax code and makes it more transparent. However, the objective for such action should not simply be to increase government revenues; it should be a precursor to lowering statutory rates.

Geoffrey Lawrence

Geoffrey Lawrence

Director of Research

Geoffrey Lawrence is director of research at Nevada Policy.

Lawrence has broad experience as a financial executive in the public and private sectors and as a think tank analyst. Lawrence has been Chief Financial Officer of several growth-stage and publicly traded manufacturing companies and managed all financial reporting, internal control, and external compliance efforts with regulatory agencies including the U.S. Securities and Exchange Commission.  Lawrence has also served as the senior appointee to the Nevada State Controller’s Office, where he oversaw the state’s external financial reporting, covering nearly $10 billion in annual transactions. During each year of Lawrence’s tenure, the state received the Certificate of Achievement for Excellence in Financial Reporting Award from the Government Finance Officers’ Association.

From 2008 to 2014, Lawrence was director of research and legislative affairs at Nevada Policy and helped the institute develop its platform of ideas to advance and defend a free society.  Lawrence has also written for the Cato Institute and the Heritage Foundation, with particular expertise in state budgets and labor economics.  He was delighted at the opportunity to return to Nevada Policy in 2022 while concurrently serving as research director at the Reason Foundation.

Lawrence holds an M.A. in international economics from American University in Washington, D.C., an M.S. and a B.S. in accounting from Western Governors University, and a B.A. in international relations from the University of North Carolina at Pembroke.  He lives in Las Vegas with his beautiful wife, Jenna, and their two kids, Carson Hayek and Sage Aynne.