The Progressive Leadership Alliance of Nevada on Wednesday called on lawmakers to replace the Modified Business Tax with a corporate income tax.
State Director Bob Fulkerson called Nevada's current tax structure deeply flawed saying it is "inadequate, inequitable and unstable."
The organization's proposal also would extend sales taxes to services and make the gold miners pay more.
The Alliance's Jan Gilbert said replacing the business tax with a corporate income tax would generate $483 million - nearly $100 million more even if all businesses making less than $500,000 a year were exempted. According to a briefing document, the proposal could generate $861 million - $476 million more than the business tax - if a two-tiered rate were used with no exemptions for smaller businesses.
"We don't want to hurt small businesses," Gilbert said.
Expanding the sales tax to include services, which make up the majority of Nevada's economic engine, the proposal says would generate up to $792 million in revenue.
Finally, changing the net proceeds of minerals tax, they said to a natural resources tax would bring in $197 million.
Altogether, they said the package would generate $1 billion in added revenue for the state.
Fulkerson and the Alliance's Launce Rake said Nevada is currently 47th in tax burden among the states. Rake said if low taxes were the only thing businesses were looking at in deciding where to locate, Nevada would have many more businesses coming to the state.
"It hasn't worked," he said.
The proposal, they said, would protect essential state services while the state worked out a more stable set of solutions.
Republican Gov. Brian Sandoval has said he will veto any bill containing a tax or fee hike, and reiterated his position in a televised speech Tuesday night.
He also said he would add back $242 million to K-12 education based on higher than projected tax forecasts, but added that while Nevada's economy is showing signs of improvement, it's still fragile.
The governor said businesses are still struggling and "cannot afford a tax increase or further intrusion by government."
At Wednesday's news conference, Fulkerson said, "It's inconceivable to some of us how Gov. Sandoval can sleep at night."
Battle lines over Sandoval's proposed budget, now estimated at $6 billion, have been taut since the session began Feb. 7. But with lawmakers facing a constitutionally mandated deadline of June 6 to adjourn, a continued stalemate will likely result in a special session.
Democrats hold slim majorities in the Senate and Assembly, but lack the clout to pass tax increases or override a governor's veto. Likewise, Republicans cannot pass a budget without support from some Democrats.
The Democrats are expected to announce their funding plan today.
• The Associated Press contributed to this report.