Nevada moving to kill a particularly foul mining subsidy 

Most of the time when President Obama and environmentalists talk about oil and coal subsidies, they're either exaggerating or misleading. For instance, Obama focusses on a broad tax subsidy, known as the domestic production tax credit, which applies to manufacturing, foresting, mining, and drilling -- he wants to end it just for drilling. (I would kill the whole tax credit and replace it with an across the board rate cut in income taxes.)

But in Nevada, the state really has armed the mining industry -- for coal and other minerals -- with the power to steal legally. The mining industry, among others, can use eminent domain to take land that has coal on it (they have to pay the owners, but it's still theft because the owners do not have the right to refuse the sale).

Nevada's senate just passed a bill, almost unanimously, to strip the mining industry (and the defunct sugar beet industry) of this power. The Bloomberg story on this has some interesting details.

First is this standard, but telling, argument by industry:

When the bill was introduced in February, mining representatives said it would harm mining and exploration efforts in the state, and cost Nevada the high-paying jobs that go along with the industry.

The thing is, these "mining representatives" might be right. On the one hand, land owners would have more incentive to find their own coal or silver, because they'd be able to keep the mineral rights or get market value for them -- thus boosting exploration. On the other hand, industry might dry up because the cost of getting the minerals would go up once mining companies had to pay full price for the land.

Nearly every time you end a subsidy for a product or an industry, that industry suffers. But -- to channel Bastiat -- all along, the subsidies have been victimizing unseen industries: the industries or businesses that would have gotten the investment if not for loan guarantees for the favored industry, the businesses that would have made use of the land if not for eminent domain powers vested in the favored industry, and so on.

So the allocation of resources in Nevada will shift if this bill passes, and political favor will matter less while economic value will matter more.

So, yes, this bill could hurt mining. It will probably help the state.

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Timothy P. Carney

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