At the present time, the United States federal government does not receive taxes from mining hard rock minerals. It is unknown how much gold, silver, copper and other precious metals are mined across 700 million acres because an 1872 U.S. mining law does not require mining companies to disclose such information, according to a recently released Government Accountability Office (GAO) report.
Democratic legislators and independent institutes are now putting forth an initiative that would apply taxes and royalties on mining of gold and other precious metals. It is projected that this would add billions of dollars to the federal government’s long-term budget at a time when Washington faces a $16.4 trillion national debt and a trillion-dollar-plus budget deficit.
It is suggested that a levy of 12.5 percent should be implemented so taxpayers can generate hundreds of millions of dollars each year, while also benefiting from the boost in gold prices that has been transpiring since the year 2000.
“Regarding the availability of data on hard rock minerals, we found that federal agencies generally do not collect data from hard rock mine operators on the amount and value of hard rock minerals extracted from federal lands because there is no federal royalty that would necessitate doing so,” the report stated. “Furthermore, while many western states collect data on the hard rock minerals produced in their state for purposes of assessing a state royalty, they generally do not collect data on the volume of those minerals extracted from federal land within those states.”
Arizona Democratic Congressman Raul Grijalva, who sponsored House Resolution 3446 Fair Payment for Energy and Mineral Production on Public Lands (12.5 percent levy), and New Mexico Democratic Senator Tom Udall are two of the lawmakers calling for the tax and sought the GAO report.
“This report confirms what we’ve been saying all along – that we need to reform the mining law of 1872,” said Udall in a press release. “Hard rock minerals are natural resources that belong to the American people, and we need to make sure we are getting the best return on what should be an investment – not a giveaway.”
Even some Republicans are considering industry reforms. Alaska Republican Senator and top member of the Energy and Natural Resources Committee Lisa Murkowski said that the “1872 Mining Law should be updated to include a royalty” as well as reducing the paperwork required.
However, there are many that are skeptic that such reforms could take place because Nevada Democratic Senator and Senate Majority leader Harry Reid receives tremendous support from the mining industry in his home state and there is a general agreement that it would be rather difficult to garner his support.
Nevertheless, even if reforms do not take place there are legislators looking at ending tax breaks and exemptions that add up to hundreds of millions of dollars for mining businesses, and also benefit the oil and gas industry.
“There’s a simple legislative fix for this big hole in the federal government’s revenue stream, and it’s only fair that companies benefiting from access to public lands pay their fair share,” stated Grilvaja.
Companies have already begun to defend the mining law and argued that taxes have risen substantially. Barrick Gold Corp. said that not only are its mining operations on a fraction of federal land, but that also its taxes have quadrupled in the last five years in part due to the increasing gold prices.
Despite these tax claims, if such changes are made, Freeport-McMoRan Copper & Gold Inc’s reserves of copper and molybdenum, for instance, would generate approximately $700 million to the federal and state governments. Meanwhile, the Goldstrike mine in Nevada would create $150 million in revenue for the coffers. (All figures based on Reuters tabulation.)
“We are giving our gold and silver for free and don’t even know how much we are giving. We need to always be looking back and seeing if there is a good reason to continue with exemptions,” said Sen. Udall, reports Reuters. “That’s something we’re not very good at in government – ending the exemptions when they’re no longer needed. Everyone agrees we need a balanced package to find new revenue and this seems like the right time for reform.”
Udall is expected to introduce legislation in the new congressional session, but it is unknown at what tax rate the bill would include.
Economic Collapse News has reported that many gold analysts see gold hitting $2,300 by 2014 and then $2,500 by the end of the same year. Peter Schiff, president of Euro Pacific Capital and avid goldbug, has projected gold eventually reaching $5,000 an ounce.
It was also reported that American Eagle gold coins saw a boost in sales during the month of November. Compared to the same time a year ago, sales tripled as about 131,000 ounces were sold due in part to fears of the fiscal cliff and the economic collapse.