Horsford says Sandoval's plan for mining industry violates no-new-taxes pledge

CARSON CITY -- Senate Majority Leader Steven Horsford fired the first salvo Tuesday in what has been dubbed the "tax or ax" session when he accused Gov. Brian Sandoval of violating his no-new-taxes pledge.

Horsford said the governor wants the mining industry to make a $60 million tax payment in 2012, pointing out that the industry was not supposed to make this payment and that by requiring it now he is increasing a tax.

The mining industry agreed during the 2009 legislative session to make an advance payment of taxes to help the state through a revenue shortfall. In exchange, legislators said the industry would not have to pay the taxes in 2012, a step that in effect allowed the state to pay back mining for its earlier advance tax payment.

In his proposed budget now before the Legislature, Sandoval pushes that payment to 2014.

"Doesn't it increase taxes on mining?" Horsford, D-Las Vegas, said during a hearing of the Senate Revenue Committee, a group formerly called the Senate Taxation Committee. "To me it is a tax increase."

The Sandoval administration saw things differently.

"It's definitely not a new tax or an increase," said Dale Erquiaga, Sandoval's senior adviser. "Prepayment of tax liabilities has been used in prior budgets, and that's all this is."

Horsford said he always has opposed prepayment of taxes because it leaves future legislatures short of what they need to pay bills.

"It is a very obvious example of choosing certain revenue for whatever political reason and not considering others," Horsford said after the hearing on Sandoval's mining tax plan.

In his opening day speech, Horsford contended Sandoval's spending plan is about $2 billion below what is needed to properly fund education and other agencies. Sandoval proposes general fund spending of $5.8 billion over the next two years, or $402 million less than current spending. State agencies requested $8.3 billion.

With gold selling for more than $1,300 an ounce, the mining industry once again is being eyed by the Progressive Leadership Alliance of Nevada and others as a source of additional revenue for the state.

PLAN unsuccessfully tried to persuade legislators two years ago to increase mining taxes by $141 million a year by reducing deductions the industry can make before calculating the net proceeds of minerals tax. Numerous Nevadans during public hearings also urged the Legislature to increase taxes on the mining industry.

Jan Gilbert, PLAN's lobbyist, asked the Revenue Committee on Tuesday to increase mining and other taxes, but not taxes that would have a regressive effect and hurt the poor.

Horsford also said he cannot choose "revenue solutions" until the Senate Finance Committee reviews all state budgets and legislators determine exactly how much money is needed.

But he expressed dismay that Sandoval wants to provide a tax cut for all businesses, regardless of their profitability.

During the 2009 session, legislators voted to nearly double the modified business or payroll tax, increasing the rate to 1.17 percent of employees' wages, up from 0.63 percent.

But in passing that increase, lawmakers put a lower 0.5 percent tax on the first $250,000 of wages of all companies. The net effect of this reduction was to help small companies, generally those with six or fewer employees.

The payroll tax changes are set to expire on June 30. After that, the tax rate will be 0.63 percent, including on the first $250,000 of income paid by companies.

Sandoval, however, wants to leave the 0.5 percent rate on the initial $250,000 of income paid by all companies.

Horsford pointed out that Sandoval's plan will help not only small companies but larger companies that are making good profits.

"For big businesses that are profitable, it is a tax cut," he said.

But Russell Guindon, a legislative fiscal analyst, responded that "every business would benefit from the cut to 0.5 percent."

In an interview, Horsford said lawmakers need to shape the legislation so that highly profitable companies do not get a tax break.

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