Lawmakers consider changes to tax structure

At the end of a legislative session marked by a historic drop in revenue, Nevada lawmakers approved two bills early Tuesday that could pave the way for new taxes in the future.

State coffers suffered everywhere, but Nevada's problems were more acute because the state has historically low taxes on business, no personal income tax and the economy is dependent on tourism and gambling, industries where earnings dropped month after month.

Throughout the 2009 legislative session, lawmakers struggled to deal with a

44 percent drop in revenue, and in the end passed a

$6.8 billion, two-year state budget and $1 billion in tax increases, including a $781 million tax package and a room tax increase projected to generate about $220 million over two years.

Legislators couldn't consider a personal income tax because it is prohibited by the Nevada Constitution. Some wanted to see new levies such as a tax on profits, business transactions or prostitution acts, but those suggestions failed to win approval.

At the end of the session, Senate Majority Leader Steven Horsford, D-North Las Vegas, introduced legislation to create a study between now and the 2011 session that would explore which broad-based taxes would be right for the state, and to start setting the stage for those changes.

"As we said prior to the session and throughout, it's time for us to create a broad-based solution for our state and to fix our budget once and for all," Horsford said. "When you look at the next session, we know we will have an enormous budget shortfall, because we will not have that one-shot funding."

Horsford worked on a proposal for a net profit tax during the session, but said it became clear that implementing the broad-based tax wouldn't be possible, and even if it was it would not raise enough revenue in time to help balance the budget for the next two fiscal years.

Also, political support from Republicans was crucial to pass the budget and tax package over Gov. Jim Gibbons' veto, and some made it clear they would only support certain types of taxes.

In the final days of the session, Senate Minority Leader Bill Raggio, R-Reno, suggested a competing interim study that would explore changes to the tax structure, but would not include details on which taxes to raise, or fund the implementation of a major tax change.

In the end, a compromise included elements of both tax plans. SCR37 won approval early Tuesday, along with SB143, a companion proposal that funds the study.

Horsford said his original proposal would have allowed the interim committee to put the structure in place to implement new taxes, so that rather than facing a yearlong process, a future legislature could implement a new tax in about six months.

Assembly Majority Leader John Oceguera, D-Las Vegas, who co-sponsored SCR37, said the Legislature discusses the tax structure every session, but usually doesn't have enough time to begin implementing a major change.

"It wasn't everything we hoped for," Oceguera said. "We had hoped for an implementation plan, but there had to be a lot of compromises."

Assembly Taxation Chairwoman Kathy McClain, D-Las Vegas, said she also had hoped for a long-term changes to the tax structure.

"The situation itself didn't really lend itself to long-term planning," McClain said. "We had the stimulus money, the budget had to be balanced and the economy just kept getting worse and worse. But I'm happy with the concept, and I hope it works out."