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New chamber tax study sparks harsh words from Sandoval

CARSON CITY — Gov. Brian Sandoval slammed the Las Vegas Metro Chamber of Commerce on Thursday over a new study that criticized his proposal for a business license fee to raise money for public education.

That measure, Senate Bill 252, is expected to see a vote today in the Senate Revenue and Economic Development Committee.

Shortly after Sandoval’s comments, the Chamber issued an apology for the “tone and tenor” of the report and said it was no longer using the services of the Tax Foundation, which issued the critical report.

Sandoval had unusually harsh words for the chamber report prepared by the Tax Foundation that found SB252 would turn the existing flat business license fee into a “complex and arbitrary tax” that would result in marginal tax rates as high as 13 million percent.

A marginal tax rate is the amount of tax paid on an additional dollar of income. The marginal tax rate increases as income rises, so lower income earners are taxed at a lower rate.

“There are better and worse ways to raise a dollar of revenue, and the BLF as designed is one of the worst from the standpoint of simple, neutral, transparent tax policy,” said Joseph Henchman, foundation vice president of state projects and a co-author of the new report.

Sandoval called the report “utterly irresponsible, intellectually dishonest and built upon erroneous assumptions.”

“The only good to come from this stunt is that for those of us who are working in good faith to solve Nevada’s education challenges, it removes all doubt about where the Las Vegas Chamber stands,” Sandoval said. “I believe the chamber’s leaders have done their membership a terrible disservice and have harmed the credibility of an organization that purports to stand for education.”

The Chamber statement said: “While the Tax Foundation acted independently and the Metro Chamber was provided no editorial control, we recognize, as do others, that the report’s misplaced style and commentary obscures the facts and data underlying the analysis. We will continue working in good faith with the governor and give thoughtful analysis to each of the proposed tax funding options.”

While that dispute raged on, Senate Majority Leader Michael Roberson, R-Henderson, who is also chairman of the Revenue Committee, said he plans to hold a committee vote on SB252 Friday, which would bring it to the Senate floor for a vote sooner rather than later.

The changes to the business license fee would generate $430 million in the next two-year budget. That new revenue is proposed to go directly to Sandoval’s many proposals for public education, from an increase in funding for English Language Learners to nearly $100 million from $50 million to $36 million in first-time money to combat bullying.

But the bill requires a two-thirds vote to win passage in the Senate. Republicans are in the majority, but they are three votes shy of the 14 needed for approval, assuming all members of the GOP caucus would vote for the measure.

Senate Democrats said they are in no rush to send the measure to the Assembly.

Sen. Ruben Kihuen, D-Las Vegas, said the bill is a significant policy issue and that his constituents and small-business owners in his district have not been given an opportunity to weigh in on the measure. There are also other tax proposals that need to be vetted, he said.

Senate Minority Leader Aaron Ford, D-Las Vegas, agreed, saying he has just sent out 500 letters to businesses in his district to get their comments on the proposal. There is no reason to be in a rush to vote on the bill, he said.

In another tax development, the Senate Revenue Committee was briefed on a separate revenue measure that would extend a collection of taxes now set to expire June 30.

Senate Bill 483, which proposes to make many of the provisions of the so-called “sunset taxes” permanent, also includes a proposal from Sandoval to raise the tax on a pack of cigarettes from 80 cents to $1.20, which would raise about $39 million a year.

It also includes an increase in the rate of the modified business tax that would be paid by mining companies from 1.17 percent to 2 percent, the same higher rate that is paid by financial institutions.

The cost to the mining industry for the change to the modified business tax is worth less than $10 million over two years, said Chief of Staff Mike Willden.

Sandoval has included both the cigarette and mining proposals in his 2015-17 budget. The sunset tax bill would also maintain the higher 1.17 percent tax rate for the modified business tax, with firms with less than $340,000 in payroll exempted.

Only about 30 percent of Nevada businesses with payroll would pay the tax.

The sunset package would also continue a 0.35 percentage-point hike in the sales tax to support schools.

In all, the bill would generate about $879 million, with $502 million going to the general fund. The remainder would support the state’s public schools, said state Budget Director Jim Wells.

The sunset taxes were first implemented to balance the state budget in 2009. The package was extended in 2011 and 2013.

Contact Sean Whaley at swhaley@reviewjournal.com or 775-687-3900. Find him on Twitter: @seanw801.

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