Mining, Cheating and the Meaning of Government

Nevada’s Department of Taxation has found that three big mining companies—Barrick, Eagle Picher and Ormat Nevada—underpaid their taxes by $8.7 million since 2008.

That should annoy you. What should annoy you more—and matter more—is that the state just found out. What that tells us about Nevada: The 2011 Legislature discovered that the state hadn’t audited mining taxes when it should have been doing so. In other words, Nevada’s original sin has met the state’s self-fulfilling prophecy.

That sin was the Nevada Constitution, which included two provisions that have helped lead to the prophecy. The first provision treated mining differently than other forms of property by agreeing to tax only the net proceeds from the mines.
Various groups have supported increasing the tax rate on mining and even amending the constitution to eliminate the tax break. The mining industry understandably lobbies hard to keep things as they are.

The second provision set up a Legislature that meets only biennially. The Nevada Constitution’s framers wanted a citizen Legislature that would govern as little as possible, and accordingly planned for a weak, small state government.

These combine to create the self-fulfilling prophecy. A significant number of Nevadans dislike government. Some of them even have moved here claiming that they sought to escape states they define as having too much government—California, for example. Efforts to expand government or make it a better place to work invariably attract loud criticism. For example, someone somewhere is fuming that state Sen. Steven Horsford insisted on creating the new Mining Oversight and Accountability Commission, which reviewed the audits and resulted partly from the discovery that mining companies had taken deductions they weren’t supposed to take. Horsford and others involved deserve praise for wanting to make sure the state and its industries dot their “i’s” and cross their “t’s.”

Critics of government should be happy to know that Nevada ranks 50th in the nation in the number of government employees per capita. Some think this is a good thing; I am one of those government employees who believes there’s still more fat that could be trimmed. But such a national ranking is scary.

The idea that Nevada government is a bastion of liberalism is misguided, to put it mildly. No governor or Legislature in this state’s history has sought an expansion of government that would have been greater than any other state. And even our most liberal governors—Grant Sawyer and Mike O’Callaghan come to mind—preached fiscal conservatism.

But Nevadans all-too-often attack, belittle and deny the need for government and the people who work in government, and have done so from the state’s beginnings. Sure enough, the biggest financial scandal in Nevada history occurred during the first few years of statehood, when a state treasurer may have embezzled about $100,000 in state money that would be the equivalent of hundreds of millions today. Maybe leaving the henhouse unguarded helped the fox get in? (Interestingly, one of the historians who uncovered this story, Dale Erquiaga, served as a top adviser to his longtime friend, Gov. Brian Sandoval. Apparently, they didn’t discuss that research, or the historical parallels didn’t sink in.)

So Nevadans wonder why the mining industry wasn’t audited when it should have been. We underfund government because we dislike it, then criticize it when it fails to accomplish what we want it to do. The failure to keep up with audits is minor in comparison with other results—from the state lacking enough regulators to inspect clinics conducting colonoscopies (as in Dr. Dipak Desai’s federal and state legal problems) to the Clark County School District firing hundreds of teachers while trying to improve student test scores and classroom performance.

Perhaps if Nevadans recognized the good work government actually does and stopped wringing their hands at government’s failures they wouldn’t have to wonder.

It’s called a self-fulfilling prophecy. It’s really a self-induced disaster.