A new federal tax on mining threatens American industry.
11:00 PM, Nov 6, 2007 • By WHITNEY BLAKE
IN AN ATTEMPT to overhaul an 1872 mining law, the House quietly passed the Hardrock Mining and Reclamation Act last Thursday, imposing royalty taxes on the mineral mining industry. Rep. Nick Rahall, chair of the House Natural Resources Committee and a sponsor of the bill, says it will protect the environment and stop the "blatant abuse" of the mining industry's current royalty-free use of federal lands.
The bill pits House and Senate Democrats against each other, as Sen. Majority Leader Harry Reid, from the gold mining state of Nevada, has denounced parts of the legislation. Nevada is the top gold producer in the country, and the fifth largest in the world, according to the National Mining Association. Reid is concerned about the jobs of those in the rural communities of his state, spokesman Jon Summers told me. In total, 170,000 mineral mining jobs are at risk.
The bill passed by a margin of 244 votes to 166. Besides Reid, Democratic lawmakers from heavy mining and manufacturing states are not happy with the bill either. Representatives Shelley Berkley, also from Nevada, Stephanie Herseth Sandlin of South Dakota, and Dan Boren of Oklahoma voted against the act. All of their offices either did not respond to requests for comment or were unavailable for comment.
A 2006 World Bank study sums it up well: "A decline in exploration expenditures relative to other countries often provides the first indication that a country is losing its competitiveness in attracting investment into its mineral sector."
Investments are already declining, and an 8 percent tax on new companies will stifle potential growth. While Rahall says that "multi-national conglomerates" are taking over federal lands for mining purposes, of the 6,603 mining companies in the country, 99 percent, or 6,542, are small businesses with less than 500 employees. The bill won't just hit mineral mining states like Nevada, Arizona, Colorado, New Mexico, Utah, Alaska, and California.
Mining companies will be hard pressed to pass the bulk of the royalties along to manufacturers, since commodity prices are determined on a global level. But imports are more expensive for manufacturers, who in turn are forced to pass the costs along to the consumers. "It makes the cost of doing business that much more expensive," said Keith McCoy, vice president of energy and resources for the National Association of Manufacturers.
And like energy production, less domestic production of minerals has national security implications--increased dependence on foreign commodities for the manufacture of military equipment.