Gov. Brian Sandoval’s much anticipated tax plan was introduced in the Nevada Senate late Wednesday.
Senate Bill 252, a bill more than 200 pages long, was referred to the Revenue and Economic Development Committee for a hearing next Wednesday with all members of both the Senate and Assembly invited to participate.
The bill outlines the business license fee designed to generate about $438 million over the biennium.
It’s a plan opponents say eerily mimics the teachers association’s gross receipts tax voters rejected last November. The tax would scale what a business owes each year on the North American Industry Classification System (NAICS) which breaks businesses from utilities and construction to services including lawyers into different classes. After that, the legislation increases what each business owes according to its gross revenue.
The new tax would be applied to more than 30 super classifications which experts say takes care of the differences between businesses, some of which have higher labor costs, others having a higher percentage of costs in goods and materials.
Every business under the plan would be hit with a minimum tax of $400. That could rise to as much as $4 million for the state’s largest businesses.
But the analysis laid out when the plan was presented showed the top payment by any Nevada business would be $2.58 million by the Accommodations category — resort hotel/casinos.
Nevada largest utilities — under the NVEnergy flag — would pay $1.75 million.
“This is a big discussion about how we modernize and better fund education and work toward creating, as the governor describes it, the new Nevada,” Republican Senate Majority Leader Michael Roberson said. “Every member of the Legislature needs to be invested in this discussion.”
The Secretary of State would have the authority and, in fact, be required, to revoke the license of businesses that fail to pay their quarterly license fee and prohibit issuing new business licenses or reinstating a business’s license to do business in Nevada unless the license fee is paid in full.
The committee of the whole proceeding is intended to give all lawmakers a thorough explanation of what the new law does and how it does it at the same time and indicates the Senate, at least, intends to move quickly on the plan.
The business license fee is just part of the proposed package Sandoval used to balance his $7.3 billion General Fund budget for the coming biennium. He needed about $1.1 billion in added General Fund money since the Economic Forum only projected $6.6 billion in revenues from existing sources.
In addition, Sandoval has proposed raising the taxes paid by restricted slot route operators and a $78.3 million increase in the cigarette tax.
Those pieces of legislation have yet to be introduced.
Together, they bring the new revenues proposed by Sandoval to $569.4 million over the biennium when a $14 million reduction in mining receipts is figured in.
Other major pieces of the plan include making permanent $544.5 million in General Fund tax and fee increases that were supposed to sunset July 1. The largest pieces of that is the $277 million increase in the Modified Business Tax.
Finally, his budget makes permanent $697 million in non-General Fund revenues that also were supposed to sunset, the largest being the $376 million from the Local School Support Tax increase and the IP-1 Room Tax which also goes directly to schools.
The grand total increase in revenues to cover Sandoval’s budget comes to $1.8 billion.
Some advocacy groups have already taken a position on the fee hike. The Las Vegas Global Economic Alliance announced support for the proposal on Wednesday and said the tax increase would have a negligible impact on future state economic development.
“The LVGEA recognizes that it is imperative to start at the beginning and both reform our K-12 education system and pay for programs that will create a workforce that will be competitive in the 21st century global economy,” said Ray Specht of Toyota Financial Savings Bank, the chairman of the board of the alliance.
But other groups have come out against the plan, including the prominent conservative fundraising group Keystone Corporation. The organization said it’s opposed to plans to tax business income, including the margin tax that failed on the ballot in November, but is going to work with the governor on vetting alternatives to the business license fee.
Democrats have said they want to review Sandoval’s plan to ensure it doesn’t harm small businesses. Democratic Sen. Pat Spearman said last week she’s crafting an alternative spending plan that will provide at least as much revenue as Sandoval’s plan, although the details have not been released.
“We’re going to look to make sure it’s fair, sustainable, that it’s broad-based, that it’s not hurting small businesses and the middle class,” Senate Minority Leader Aaron Ford said. “We’re going to take as much time as we need.”
The Associated Press contributed to this report.