CARSON CITY (AP) — Nevada Gov. Brian Sandoval’s $1.1 billion tax plan cleared a massive hurdle Sunday night after passing the Assembly, putting it one step away from a governor who’s expected to sign into law the state’s largest one-time tax increase and fund ambitious initiatives to improve K-12 education.
Assembly members voted 30-10 to approve an amended version of SB483 with less than two days left in the legislative session. The bill combines expanded business taxes with a cigarette tax hike and permanently extended several expiring “sunset” taxes.
Senators are expected to vote Monday morning to give the bill final approval, which would send the measure to the governor’s desk.
The vote is a major victory for the Republican governor, who needed to convince two-thirds of the Republican-dominated Assembly to back a plan that funds a significant chunk of his proposed $7.4 billion, two-year budget.
“I am incredibly proud of the men and women of the Assembly who today affirmed that Nevada is ready to lead,” Sandoval said in a statement. “This vote moves us one step closer to cementing the legacy of improving public education by both raising accountability as well as increasing investment in order to suit the needs of generations to come.”
The taxes are part of Sandoval’s effort to put millions of dollars into education initiatives targeting English language learners, children in poverty and other at-risk groups. Lawmakers have already approved a large percentage of the state’s budget, including a massive expansion of K-12 education programs that Sandoval touts as necessary to improving the state’s consistently low education rankings.
The plan faced resistance from a vocal bloc of anti-tax conservatives, concerned that voters overwhelmingly rejected a ballot question seeking to create a similar business tax.
“Eighty percent of the voters said no,” said Republican Assemblyman Ira Hansen, “and we’re going to sit here and we’re going to say we’re smarter than you, we’re going to reject what you did in that election cycle, we’re going to ramrod down your throats this new, so-called commerce tax? This is disgraceful.”
But heavy-hitting business groups lined up behind the plan, and several Republicans who were on the fence announced their support shortly before the vote.
“I was uninformed. I made a mistake. I sat and spouted the party line: ‘No new taxes, no matter what,'” Assemblyman Erv Nelson said in a floor speech, explaining his change of heart and ultimate support. “I’ve thought about this, I’ve fasted. I’ve prayed, and I think this is the right thing to do.”
Elements of the plan include:
—A hike in the business license fee. The fee for corporations would rise from the existing $200 a year to $500, while the fee for the rest of the business entities would remain at $200.
—A hike in the payroll tax. Sandoval’s plan raises the state’s existing modified business tax from 1.17 percent to 1.475 percent of wages beyond the first $200,000 a company pays out each year, and 2 percent of those wages for the mining industry and financial institutions. Companies would still get to deduct health care premiums for employees from the calculation.
—A “Commerce Tax” on gross revenue. Industry-specific tax rates will apply to businesses with more than $4 million in Nevada revenue each year. Businesses can count 50 percent of their commerce tax bill as a credit against their modified business tax bill — a provision that’s intended as a perk to those who employ people. The commerce tax aims to capture more money from capital-intensive businesses such as mines and those that do business in Nevada but aren’t based here.
— A flexible payroll tax rate. The plan allows the state to lower the modified business tax rate if revenues from the new commerce tax and MBT rate bring in more revenue than projected.
— An extension of “sunset taxes.” About $600 million of the plan comes from making a set of expiring payroll and sales taxes permanent. It also raises a tax on cigarette packs by $1.