2003 Legislative Session Repeat? Here Comes the Tax
The largest tax increase in Nevada's history took place in 2003 requiring two special sessions.
Are we headed down the same path?
In 2003, then Governor Guinn supported the tax increase proposed by the legislature of $836 million. However, the legislature failed to have a two-thirds required vote for any fee or tax increase.
Yet the increases went into effect. The tenuous litigious packaged budget was sent into the decision making hands of Nevada's Supreme Court. The court ruled the tax increase could take place, with the decision later overturned.
That was then and this is now...
In 2009 the two-thirds vote is easily attained in the Assembly. However the Senate will have to garner two Republican votes to secure the magic super-majority rule number allowing any tax increase to be passed.
What is not an illusion is the surfacing of the final pieces to the long awaited proposed budget by the Democratic Leadership.
"We will be crafting an alternate budget to the governor that will protect public safety and keep the universities open." stated Speaker Buckley. "We will have to have drastic cuts because of the shortfall. We will also have to raise some revenue."
Here's what we've learned so far about the alternative budget that is expected to raise $780 million in revenue...
Proposed Tax Increases & Revenue Projections
Modified Business Tax ~ Payroll Tax
On Thursday, May 14th the Joint Tax Committee proposed reducing the Modified Business Tax from .63% to .50% for payrolls' under $250,000 a year and increasing the tax percentage for total wage compensation over that amount.
A consensus, of the tax percentage that would apply above the $250,000 payroll, was not reached by the Committee members. However, discussions include doubling the payroll tax rate to 1.25% equating to a projection of $349 million in additional revenue.
Governmental Services Tax
On Saturday, May 16th, the Joint Tax Committee had two only two Senate representatives Senator Care (for a short time) and Senator Carlton with all Assemblymembers in attendance.
The three amendments introduced proposed increasing Government Services Tax revenue 1) Vehicle Registration Fees, 2) Business License Fees, and 3) Sales Tax.
Vehicle Registration Fees
An amendment was introduced to raise the vehicle registration fee ranging between $21 and $49 each year on vehicles and trucks, depending on the MSRP value. A fee was based on a depreciation schedule without any increase for new vehicles. The proposed increase in fees is expected to raise $94.3 million over two years with an effective date of September 1, 2009.
Click Here to read Vehicle Registration Fees Legislative Amendment
Click Here to see Vehicle Depreciation Schedule
Business License Fees
A proposal to increase Business License fees from $100 to $200 included additional location language. Businesses with multiple locations would pay $200 per physical location. Staff reported a minimum of 19,000 additional business licenses that would be assessed.
Proposed legislative language to clarify the classification of an independent contractor may factor into the collection of fees that may not have been previously assessed.
This point was highlighted in testimony by the brothel industry's lobbyist who stated that the "girls" will be - at long last - recognized as a contributor to Nevada's general fund. He opened his testimony by thanking the members for finally legitimizing the oldest trade...and without missing a beat the Chair of the Assembly's Taxation Committee, McClain, retorted back, "You mean Farming?"
Humor aside, the revenue projections is estimated at $71.6 million over two years.
Click Here to read Proposed Legislative Amendment
Sales Tax
Increases in the sales tax (gross receipts & excise) was discussed without a consensus in establishing an amount. In fact the "mock-up" amendment had asterisks (***) in the language for each occurrence before the word percent. Apparently for every quarter point increase in sales tax it equates to a $190 million in revenue every two years. The effective date proposed is August 1, 2009.
Click Here to read Proposed Legislative Amendment
Click Here to see Current Sales Tax Map
Budget Date Deadline
Fiscal staff will now begin finalizing the budget that is expected next week. May 21st is fast approaching and according to the Legislative calendar this is the deadline date to "Finish Budget Differences".
Once the budget is presented to the Governor the five day count down begins. He can either sign it. Veto it. Or, do nothing and it becomes law without his signature.
As per Nevada's Constitution the budget is to be finalized by the end of the Legislative Session, which is June 1st. If the deadline date passes without an agreed upon budget the Governor will have to call a special session in order to keep the state funded.
In the event of a special session, it is the Governors' responsibility to identify the special session issues for the Legislature. This may include the absence of any tax increase.
Politically forward looking legislators face additional pressure. It is insanity to consider using the word tax during these very challenging time. Potential candidates are sure to be positioning themselves to exploit any legislator who supports the tax increase in any re-election campaigns.
Imagine the headlines proclaiming an elected official who supported raising taxes in the worst economic times since the great depression? Worse yet, is if the number exceeds $836 million. That is self inflicted political suicide.
One can only hope that reforms to Prevailing Wage, along with PERS and PEBS are truly on the table before any tax is imposed!
Stay tuned...