Democrats roll out tax plan
Legislative Democrats rolled out a tax plan Thursday designed to generate $1.5 billion more than contained in Gov. Brian Sandoval’s original budget and, over the next three years, clean up and stabilize Nevada’s tax structure.
It begins with short-term fixes to cure what Democrats described as the unacceptable parts of the proposed two-year budget and ends with implementation of two new taxes to replace the Modified Business Tax.
Those major new taxes are a broad-based sales tax on services and a corporate tax on business revenues.
A number of elements in the plan presented in a briefing to reporters, advocates and business leaders have already been supported by the Sandoval administration – including the $217 million in added state revenue and $133 million in sales tax money for schools added to the pot by the Economic Forum Monday. Also on that list, the $69 million more federal funding for Medicaid.
Cutting into that total is the reduction of some $124 million in what’s available from the school district capital money Sandoval included in his budget,
Then the plan goes beyond what Sandoval says he can support, by removing the sunsets from taxes imposed in the 26th Special Session of the Legislature on the business tax, schools portion of the sales tax and the business license fee.
Majority Leader Steven Horsford and Assembly Speaker John Oceguera, both D-Las Vegas, said those pieces generate a net $626 million to beef up the proposed 2012-2013 budget.
“It would not be a new tax because you’re already paying it,” said Oceguera.
The new tax structure they proposed, he described as “an opportunity to take the volatility out of our tax structure.”
Applying the sales tax to transactions (services) they said would generate a significant amount of money since the state’s economy is two-thirds service-based and just one-third from the sale of goods. They argued that tax would more fairly and more broadly spread the burden and actually allow the overall rate for sales taxes to be reduced over the coming years while bringing in more revenue.
But they had no hard estimates what it would produce.
The only exemptions they offered were for nondiscretionary health care and such things as utility bills.
The new business tax would be a hybrid based on the system used in Texas to replace the Modified Business Tax.
“Essentially the Modified Business Tax is as regressive on business as the sales tax is on poor people,” Oceguera said.
Their proposal would create a maximum tax of 1 percent, exempting the first $1 million in revenue. Oceguera said that would exempt 65 percent of Nevada businesses.
For those larger businesses, the plan would give them options to base the new tax. Horsford said they could simply pay 1 percent on 70 percent of total revenue, they could pay based on total revenue minus wages and salaries paid. Or they could base their tax on total revenue less the cost of goods sold.
That program would be phased in as the business tax was phased out over the next three years, Horsford said.
He and Oceguera emphasized the package is designed to present options and is far from fixed in stone. They said over the remaining month of the session, they will hold extensive hearings to allow input from all parties including the Republicans, business and advocacy groups.
“I want to make it clear I am not drawing a line in the sand,” said Horsford. “These are options. This is not about politics.”
Oceguera said all must work together because of the impact decisions this session will have on the future.
“What we do this legislative session will decide the course of our state for the next generation,” he said.
Sen. Sheila Leslie, D-Reno, said the Revenue Committee she chairs would probably meet nearly every day through June 6 end of session to hammer out the details.