Democrats on the Senate Finance Committee questioned Monday why the state keeps patching holes in the budget by extending temporary taxes instead of just making them permanent.
The issue was raised as the panel considered Senate Bill 475, a bill sought by the Sandoval administration that authorizes a continuance of taxes that should have expired two years ago.
Lawmakers in 2011 agreed to extend the sunset on those levies through June 30 of this year. Gov. Brian Sandoval’s budget relies on keeping those tax increases intact through June 30, 2015.
State Budget Director Jeff Mohlenkamp said the combined revenue totals more than $1 billion.
“The sunsets ... are for the purpose of making sure we can meet the demands of state government,” Mohlenkamp told the committee.
He said Nevada has “significant health and human service needs ... education needs,” not to mention information technology needs that “are pretty significant as well.”
But the bill also includes a proposal by Sandoval, a Republican midway through his first term, to give more businesses a break on payroll taxes, a move that will cost the general fund $25 million.
Senate Majority Leader Mo Denis, D-Las Vegas, said some of the taxes, such as an increase in the sales tax rate and a doubling of the state business license fee from $100 to $200, have been extended since 2009.
“Why don’t we make that permanent?” he asked, adding, “I haven’t heard from anybody that $100 is going to make or break anybody doing business here.”
Mohlenkamp, however, said Nevada’s economy was still in recovery and permanent tax hikes would be premature. Sandoval ran for governor on a no-new-taxes stance, though two years ago he was forced to accept extending taxes after a Nevada Supreme Court ruling blew a $620 million crater in his budget by calling into legal doubt his funding mechanisms that relied heavily on taking money from other governments.
Sen. Debbie Smith, D-Sparks, said the discussion every two years on whether to let taxes expire creates uncertainty that deters businesses from moving to Nevada or expanding their operations here.
Labor and education organizations supported the bill but also said Nevada needs a stable tax structure.
“We support extending the sunsets but would absolutely support eliminating the sunsets,” to make the taxes permanent, said Danny Thompson, executive director of the Nevada AFL-CIO.
No action was taken by the committee.
Sandoval proposed an initial two-year, $6.5 billion spending plan, though he has since said he will add $25 million each for education and mental health programs.
The budget picture will come more into focus after May 1. That’s when the Economic Forum, an independent panel charged with predicting the state’s tax revenues, meets to make its final forecast for the upcoming two years.