CARSON CITY — Gov. Brian Sandoval said Wednesday business leaders who support boosting education spending are starting to agree with him that the best way to raise needed revenue is broad expansion of a business license fee.
“They still have questions, but they are starting to recognize that this BLF proposal is looking like the best option because it’s broad-based, because it is fair and because it is simple,” Sandoval said in an interview.
The Republican governor just has to convince at least two-thirds of the Legislature, which is considering his graduated business license fee as part of a $1.1 billion tax plan. He wants to raise the current flat $200 annual business license fee and peg it to annual gross receipts. The fee would start at $400 and range up to $4 million for the largest companies, although no current businesses make enough to pay the top fee.
He estimates the new fee would raise about $250 million a year.
Sandoval said he’s waiting for a final bill draft and plans to personally pitch the plan to the Senate Revenue and Economic Development Committee, most likely on March 17. Meanwhile, he is meeting with business leaders, including those from the mainstay gaming, mining and retail industries as well as chambers of commerce — all of whom back his proposed reforms for Nevada’s poorly performing public schools.
“I’ll continue to push the business community because they have told me they want to fund education,” the governor said.
“The burden is on me,” he added. “It’s my proposals … I haven’t been hiding in my office.”
Proposed reforms range from all-day kindergarten classes and requiring students to be able to read by third grade or be held back, to more charter schools and holding school administrations more accountable for student performance.
“I continue to meet with business leaders about the (tax) bill as well as the education package, which is more important to me,” Sandoval said. “I want to have a bill … that does everything we want it to do.”
Another revenue-raising proposal, extending sales taxes to services, would be complicated, especially determining what services to exempt, Sandoval said. He wants to study services taxes for possible action during the 2017 legislative session.
Lawmakers also are considering expanding the current Modified Business Tax, or payroll tax, which Sandoval said discourages hiring and is too narrow. He said he was surprised to learn that only about 4 percent of Nevada businesses — the largest ones — actually pay it now.
Only 12,191 businesses — a fraction of Nevada’s 330,000 — actually pay the tax, and the “1 percenters” of the business elite pay roughly 60 percent of revenues, according to a Legislative Counsel Bureau fiscal analysis.
A quarterly payroll tax, the MBT hits only companies with employees, and the first $340,000 in annual wages is exempt. General businesses pay a rate of 1.17 percent; financial institutions pay 2 percent.
Sen. Michael Roberson, R-Henderson, has said the Modified Business Tax is hardly broad-based, and he’s heard it called unfair because companies with identical revenues are taxed differently based only on employee numbers.
A Tax Foundation report said eliminating the exemption and implementing an across-the-board 2 percent levy would generate an additional $400 million annually. Lowering the rate to 1.17 percent would bring in $83.7 million; and 1 percent, $5.7 million.
Sandoval said he is still “very open to hearing” other ideas, though “there really are not very many places you can go.”
Any tax matter must win approval by a two-thirds vote in both houses, or 14 out of 21 lawmakers in the Senate and 28 out of 42 lawmakers in the Assembly. The GOP controls both houses but holds a slim one-seat advantage in the Senate, 11-10. In the Assembly, there are 25 Republicans and 17 Democrats, but about a dozen GOP legislators have pledged not to raise taxes, making Sandoval’s task more difficult.
Asked if he has enough support for his tax plan, Sandoval said that “it’s way too early” to count votes.
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