Tax increases proposed

CARSON CITY -- Legislative leaders emerged from a late-night closed-door meeting Tuesday with a tentative agreement to increase sales taxes by 0.35 percent, boost the top payroll tax rate to 1.17 percent, raise motor vehicle registration taxes and double business license fees.

The plan was introduced in a committee of the Senate around 10 p.m. Tuesday as lawmakers worked long hours to push through a budget in time to override an expected gubernatorial veto.

Members of the state Senate, meeting as a committee of the whole, were still discussing the proposal at 11 p.m. but did not expect to take a vote in Tuesday's hearing.

The legislators in the "core group" involved in the negotiations emphasized that the bill, Senate Bill 429, was intended as a preliminary measure to start debate and that the details were not necessarily final. Nor were all the necessary votes secured.

Republicans' votes are conditional on further Democratic concessions on public employee benefit reforms, said Senate Minority Leader Bill Raggio, R-Reno, and they are insistent that the sales and payroll tax hikes must expire after two years.

"This is a tentative proposal that this group has agreed to," Raggio said. "We can't speak for any caucus yet. They (legislators not involved in the negotiations) have to agree to it, obviously, to get the votes that are needed. ... There are issues that are still pending on those (benefits) reforms."

Assembly Speaker Barbara Buckley, D-Las Vegas, said the idea is to get the ball rolling.

"There will be changes," she said. "But we wanted to get a bill out tonight so it can be examined."

Lawmakers believe they must get a budget passed Thursday or Friday in order to give Gov. Jim Gibbons the five days he is allowed to decide whether to veto it, then bring it back to the Legislature for a veto override before the June 1 end of the session.

The tax hikes unveiled Tuesday amount to about $781 million in state revenue over the next two years.

"The total revenue raised is within the limit we set early on in both houses and both parties," Raggio said. "These are existing taxes. There are no new taxes in the proposal."

Under the change to the depreciation schedule governing the governmental services tax -- the annual fee for registration of motor vehicles -- the minimum would increase to $16, from $6. The tax on a four-year-old vehicle worth $15,000 would rise to $137, from $116.

The state would reap about $94 million from the motor vehicle tax change, according to legislative staff estimates.

The business license fee, currently $100 annually, would increase to $200. That change would bring in about $61 million over the next two years.

A previous proposal also would have imposed the fee on each of a business's multiple locations, but that provision was dropped from the current bill.

"I'm disappointed to see that," Sen. Maggie Carlton, D-Las Vegas, said of the change. "I think the Wal-Marts of the world can afford a $200 fee for each location they put on a corner."

The change to the tax on business payrolls, formally known as the modified business tax, bifurcates the structure so that many businesses actually receive a tax break, lawmakers say.

The current rate of 0.63 percent drops to 0.5 percent on the first $250,000 of annual payroll. According to the state Department of Taxation, 74 percent of Nevada businesses have total payrolls under $250,000.

The rate then would rise to 1.17 percent on payroll amounts above $250,000, a change that is forecast to bring in an additional $346 million to the state over the next biennium.

The final component, an extra 0.35 percent in sales taxes, brings in an estimated $280 million. Sales tax rates vary from jurisdiction to jurisdiction above a minimum of 6.5 percent. The base rate in Clark County stands at 7.75 percent.

Buckley said lawmakers also hope to designate that a tax study be conducted between now and the 2011 legislative session to look at the long-term picture.

"One of the things I think we're trying to balance is next session we want to make sure the Legislature doesn't walk into a huge hole in the budget," Buckley said.

Legislative fiscal analyst Gary Ghiggeri told the senators that the revenue raised by the tax hikes would be enough to fund the approximately $6.8 billion in spending lawmakers have approved, combined with federal stimulus dollars and other revenue sources the Legislature is expected to pass, such as a requisitioning of county revenues.

Senate Majority Leader Steven Horsford, D-Las Vegas, noted that lawmakers also made more than $1 billion in cuts to state services, funding only what they deemed the absolute bare bones. "I think that's an important point to remember as we have this discussion," he said.

Raggio defended the increases as necessary in a time of extreme economic conditions. "Obviously we have to do this," he said. "We have to fund what we term essential services. ... In at least my opinion, this budget is not one with a lot of frills."

Contact reporter Molly Ball at mball@reviewjournal.com or 702-387-2919.