Tax battle in Nevada shaping up for 2014

CARSON CITY — Soon, as Shakespeare’s Mark Antony says, the sounds of “Cry ‘Havoc,’ and let slip the dogs of war” will ring across the state.

It’s coming in 2014 whether you want it or not: a civil war over taxes.

Its spoils will be more than $1 billion a year, most of it out of your own wallets.

And like the American Civil War, this war over taxes will pit voter against voter, politician against politician.

It won’t be decided on the fields of battle, but in the voting precincts during the Nov. 8, 2014, election. Each adult Nevadan will be able to decide whether to increase taxes by amounts never contemplated in state history.

“Taxes will be the focal point of the election,” said Lynn Warne, president of the Nevada State Education Association, which proposed one tax measure. “We know we will be outspent, but we will win.”

“Every politician has to take one side or another,” said Victor Joecks, communication director for the conservative Nevada Policy Research Institute. “The public will demand it. But people already understand that if they vote for the tax, then they will put companies out of business.”


They are talking about the Education Initiative — the teachers association’s ballot measure that with voter approval would levy a business margins tax — a complicated tax their estimates show would raise $800 million a year for public education. At least that is how the teachers want the money spent.

Joecks points out there is no guarantee, other than voter persuasion, that the Legislature would earmark the funds for education. If a crisis crops up, they could spend the revenues elsewhere. But Warne doesn’t expect that to happen because of the outrage lawmakers would receive from ignoring the public will.

The business margins tax is not the only tax question on the ballot. Voters also will decide whether to approve Senate Joint Resolution 15. This proposal — developed by former state Sen. Sheila Leslie, D-Reno — would change how mining has been taxed since the state constitution was approved in 1864. With approval, the Legislature in 2015 could impose much higher taxes on the industry.

Six Senate Republicans had hoped to place a third question on the ballot — one that would require a 10 percent mining tax — but Democrats and Assembly Republicans ignored it. Still, the Senate Republicans thought mining should pay $300 million more a year for public education and that could happen with voter approval.

Gov. Brian Sandoval opposes ballot initiatives. He has vowed to campaign aggressively against the Education Initiative.

“The margins tax would be extremely devastating to Nevada,” said Sandoval in a June 4 news conference.

He rattled off a long list of reasons why voters should reject the tax, pointing out his successful efforts in the Legislature to put $50 million into English language learning and nearly $40 million to add full-day kindergarten in most schools across the state “without a tax increase.” State education spending averaged $5,376 per student in the recent school year, but climbs under the next budget to $5,590 this fall and $5,676 in the fall of 2014.

The key opposition will come from the Committee to Protect Nevada Jobs, a coalition of chambers of commerce and business organizations. Tray Abney, of the Reno-Sparks Chamber of Commerce, said members soon will meet to discuss their plan for the 2014 election campaign.

Bryan Wachter, of the Retail Association of Nevada, said his organization’s poll last winter found the Education Initiative would pass by a thin margin. Additional polls are planned.

But the poll also found that if people knew that businesses which are losing money could be taxed and there is no guarantee the funds will go for education, then support fell dramatically, to the 40 percent range, he added.

“There definitely needs to be an education component to explain to people what the initiative does,” said Wachter, whose organization is a member of the Committee to Protect Nevada jobs. “It is going to be hard for people to support the tax if they know it hurts Mom and Pop businesses.”


The mining tax increase clearly will play second fiddle in Nevadans’ minds. Voters can change the constitution, but an actual increase in mining taxes would need legislative approval in 2015 before it could occur. In contrast, the Education Initiative would go into effect with voter passage.

Leslie is optimistic that the mining tax will pass and two-thirds of legislators will raise mining taxes in 2015.

“Clark County voters want the mining tax raised,” Leslie said. “They wouldn’t dare not increase these taxes. The average person in the state cares about and understands the issue. The mining industry is tearing up our land and taking nonrenewable resources.”

Nevada Mining Association President Tim Crowley said the industry has not decided what steps it might take to induce voters to kill the tax resolution.

He did note, however, that gold prices are falling, a trend that would affect the Legislature’s ability to extract more taxes. Gold sold for $1,388 an ounce Friday, down $318 from six months ago.

“Nevada mining operations, like any business, have to adjust to changes in demand as well as increasing operating costs,” Crowley said. “While challenging, all mines are addressing the recent drop in gold value with the utmost seriousness and appropriately adjusting their business models.”


Legislators had a chance in March to support or oppose the Education Initiative, but failed to take any position on the proposal, preferring to pass it on to voters.

Fred Lokken, a political science professor at Truckee Meadows Community College in Reno, said Nevada has become more like old Athens where public votes — or direct democracy — must settle pressing questions because legislators fear that whatever position they take will cost them votes.

He expects approval of the Education Initiative, but voters “will be looking at something they don’t understand.” One of the problems with the proposal is that businesses losing money could be taxed. Another is the state Taxation Department would have to create an IRS-like bureaucracy to implement the tax.

Lokken said the Legislature should have worked from Day One to draw up a fair and easy-to-implement broad-based tax on business.

David Damore, a political science professor at the University of Nevada, Las Vegas, isn’t convinced voters will approve the Education Initiative.

“Every small-business owner in the state will be all over it,” he said, noting that local voters defeated a school bond issue in November and don’t always jump to provide more money for schools.

“Obama won Clark County by 10 points and they didn’t pass a school bond,” he said.

Joecks, of the conservative think tank, contends schools don’t need more money.

“The problem isn’t government having more money, but how government spends the money it has,” he said, adding student-teacher ratios would be 18-to-1 in Clark County if all certified teachers were put to work in the classroom.


Joecks thinks legislators who support the tax increase will lose at the polls. But Lokken and Damore aren’t sure that will happen. Damore noted the mere term “Education Initiative” is positive and might win yes votes.

“Without any major statewide race, this will be the race,” Damore said. “The fact it is called the Education Initiative as opposed to the margins tax is helpful. Who is going to run against education?”

Both parties largely have “safe” legislative districts, and candidates’ support for or rejection of the initiative isn’t going to hurt them at the polls, he said. In fact, supporting something their constituents view as helping education might improve their re-election chances, he said.

“Other states have raised taxes during recessions and they are doing better than we are economically,” Lokken said.

After legislators raised taxes by more the $800 million in 2003, Democrats — who almost all supported the increase — picked up one seat in the state Senate and three in the Assembly in the next election.

Warne points to studies that show Nevada is first or second worst nationally in funding for public schools. The national Kids Count survey last year ranked Nevada worst in the nation for education quality and third worst, behind Mississippi and New Mexico, for the well-being of children.

Middle and high schools in Clark County, according to state Department of Education research released during the Legislature, average one teacher for 34 pupils.

“We have been going to Carson City for a decade and never seen significant funding for education,” Warne said. “The initiative is our best chance. We don’t believe this is a job-killing tax. Education will drive the state. Education will create jobs.”

Her organization’s own polls show support for the tax. And she pointed out that more than 150,000 voters signed the Education Initiative petitions last year.

Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3901.