Gov. Brian Sandoval’s $1.1 billion tax package to fund education and other state services caught some industry groups off guard, but the state’s largest business organizations say they will await specifics of the proposal before passing judgment.
Representatives of gaming, mining and retail industries say they like the Republican governor’s vision to improve education. It’s how to pay for it that is giving them pause.
Virginia Valentine, president of the powerful Nevada Resort Association, applauded Sandoval’s plan to jump-start school construction and capital improvements.
“The NRA has always advocated for increased and stable funding for all levels of education in our state,” Valentine said in an email. While admiring the governor’s intentions, she added, “We, like many other Nevada businesses, await the details.”
Getting the two-thirds votes in both the state Senate and Assembly needed to pass the tax package will not be a cakewalk for the popular governor. And lawmakers are expected to bring some of their own ideas on taxes when the 120-day legislative session begins Feb. 2.
The cornerstone of Sandoval’s proposal is an overhaul of the state business license fee. Businesses large and small currently pay a flat $200 each year. The governor wants to establish a tiered rate schedule, ranging from $400 up to $4 million, based on gross receipts.
Sandoval said the move would raise $430 million over the two-year budget cycleand pay for his plan to elevate Nevada’s education system from the basement dungeon to the penthouse suite, nurturing a workforce demanded by the high-tech companies such as Tesla that he’s worked to recruit to the Silver State.
“I realize these decisions are difficult. I know I am asking a lot from the business community. But I have explored every option and find this to be the broadest, least complicated, and fairest solution,” Sandoval said in his State of the State address Thursday, when he released the highlights of his $7.3 billion two-year budget proposal.
Mining, which escaped potentially higher taxes at the ballot box when voters in November rejected a measure that would have removed a cap on net proceeds from the Nevada Constitution, did not evade the governor’s revenue strategy. In addition to new business license fees, Sandoval wants $14.6 million more in payroll taxes from the industry.
In a statement, the Nevada Mining Association said it is passionate about Nevada’s schools and shares the governor’s concerns about closing the workforce skills gap. It’s also looking out for its members.
“We are also concerned about the current economic diversity being experienced in the mining industry — virtually no job growth, volatile mineral values and declining company stock prices,” the association said.
Sandoval’s tax plan also would:
■ Make permanent $560 million in so-called “sunset taxes” that were supposed to expire in 2011 but have twice been extended.
■ Raise cigarette taxes to $1.20 per pack, up from 80 cents, bringing in $78.3 million.
■ Impose a new slot tax on restricted gaming license holders with more than 500 machines or revenue of $10 million or more, for $39 million.
Business groups have long said they would support tax policy that is broad and fair in scope. But they want to see the fine print before signing off on the governor’s plan.
Bryan Wachter with the Retail Association of Nevada said its members range from mom-and-pop operations “to those that pay the highest taxes in the state.”
“If there are other options out there that do a better job of bringing in that additional revenue, then we’ll look at those as well,” he said.
There is also an underlying resentment that businesses who struggled to stay afloat during Nevada’s gripping recession are being asked to pony up while tax breaks are granted to new kids on the block. Tesla Motors was given a pass for $1.3 billion in taxes over 20 years to build its $5 billion battery plant in Northern Nevada.
“We’re treating businesses differently,” said Randi Thompson, state director of the National Federation of Independent Business.
“They are just increasing the cost of business on the small folks and keep incentivizing the big folks,” she said. “After awhile, we get a little crabby.”
Thompson said she’s not against Tesla and believes it will have a positive influence on the economy. “But most of the guys I’ve worked with have never asked for a tax incentive.”
Tesla would not be exempt from the new business license fee, though it’s unclear how much it would pay.
Nevada’s two largest business organizations — the Las Vegas Metro and Reno-Sparks chambers of commerce — also hailed Sandoval’s commitment to education but are more muted about his tax plan.
The Las Vegas business group said it looks forward to working with the governor “as conversations evolve” on state revenue needs.
Tray Abney, with the Reno-Sparks Chamber, said the group has historically opposed taxes based on gross receipts. Voters in November rejected a measure pushed by the teachers union to impose a gross receipts business margins tax.
“I’m looking forward to hearing more about it,” Abney said of the governor’s plan. “I think corporate tax reform is a piece of it but it can’t be the only piece.”
Carole Vilardo, president of the Nevada Taxpayers Association and veteran of numerous legislative sessions, said the governor’s speech was impressive and covered a number of topics discussed over the years.
“Obviously the amount of new money required is what’s going to be the challenge,” she said. “It always is.”
Contact Sandra Chereb at firstname.lastname@example.org or 775-687-3901. Follow @SandraChereb on Twitter.