Sunset tax plan advances; word still out on Sandoval tax deal
May 15, 2015 - 10:45 pm
CARSON CITY — The Nevada Senate approved a key component of Gov. Brian Sandoval’s tax plan Friday, amending and approving a bill to make some temporary taxes permanent and increasing cigarette taxes.
Senate Bill 483 passed 18-3 and now advances to the Assembly.
But it was just too early to determine whether the other key component, a tax hike deal that the governor worked out with legislative Republicans and Democrats on Thursday, will get enough support to boost spending on public schools.
Approval of the so-called “sunset bill” in the Senate comes as the Legislature sprints toward a June 1 deadline to adjourn, legislative money committees are closing budgets, and lawmakers are trying to come up with tax deal to pay for Sandoval’s $7.4 billion two-year spending plan.
SB483 would keep intact a 0.35 percent sales tax increase that supports schools and makes permanent the 1.17 percent payroll tax paid by non-financial institutions. Higher fees attached to the car registrations also would remain.
The measures were first enacted in 2009, when Nevada was walloped by the recession, unemployment soared and state coffers dried up. Though initially set to expire, or “sunset,” in 2011, they have twice been extended, and Sandoval has called for making them a permanent source of state revenue.
The bill also would raise the tax on a pack of cigarettes by $1, bringing the total state tax to $1.80. That provision alone is expected to raise an additional $348 million over the upcoming biennium.
As a stand-alone measure, SB483 is estimated to generate about $800 million. But the value will be adjusted if the new tax proposal announced Thursday by the governor and legislative leaders is enacted.
Sandoval’s Nevada Revenue Plan was announced Thursday but is still being drafted.
Many lawmakers and business groups are awaiting details before commenting, though the Retail Association of Nevada said it opposes one provision that calls for a new commerce tax based on gross receipts.
The compromise would replace Senate Bill 252, the Republican governor’s initial business license fee scheme that he first proposed at the start of the legislative session as a way to fund his ambitious education agenda. Under that plan, the annual business license fee was to jump from a flat $200 to a minimum of $400 and up to $4 million, depending on industry type and gross receipts.
Though SB252 passed in the Senate, its survival in the Assembly was very much in doubt. A bloc of conservative Republicans pledged to oppose any taxes, and Democrats balked at the impact to small businesses and the middle class.
With Republicans in control of the Assembly, Democratic support is needed to garner the two-thirds supermajority, or 28 votes, needed for passage. In the Senate where Republicans hold an 11-10 majority, 14 votes are needed.
The new plan melds ideas from Sandoval’s proposal with those initiated by Assembly Majority Leader Paul Anderson and Assemblyman Derek Armstrong, both Southern Nevada Republicans, and state Sen. Pat Spearman, D-North Las Vegas.
The measure has three prongs — business license fees, modified business taxes and a “commerce” tax based on industry type and revenue.
Annual business license fees would increase to $300 annually for most businesses, and to $500 for corporations.
The modified business tax would rise to 1.475 percent for general businesses — a higher rate than what’s included in the sunset bill. Mining and financial institutions would pay a rate of 2 percent, and the current exemption for the first $340,000 in annual payroll would be reduced to $200,000.
It also involves the commerce tax, an industry-specific tax that would be imposed on businesses with revenue of $3.5 million or more. It would be based on revenue, but companies would be able to apply 50 percent of that tax to offset payroll tax liabilities.
Minority Leader Anderson said the Assembly Ways and Means Committee will hear the bill Tuesday afternoon but gave no predictions how it will be received by the GOP caucus.
The bill still is being drafted, so legislators and lobbyists only have been told of the plan’s concept.
“I’m just starting to meet with my caucus … taking everyone’s temperature,” he said.
“I think it’s a good starting point for compromise,” Anderson said of the hybrid tax plan.
“It’s a good starting point for the end game.”
Contact Sandra Chereb at schereb@reviewjournal.com or 775-687-3901. Find her on Twitter: @SandraChereb.
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See all of our coverage: 2015 Nevada Legislature.