Gov. Brian Sandoval pulls out heavy hitters to support tax hike

Sandoval, supporters, opposition sound off in lengthy hearing on plan

A joint meeting of the Senate Revenue and Economic Development Committee and the Assembly Taxation Committee on Wednesday heard from a litany of witnesses for more than eight hours backing the governor’s proposed business tax.

Among the backers were numerous business organizations including Rob Hooper, head of the Northern Nevada Development Authority who said his board of directors voted this week to “fully back” the proposed business license fee.

Tom Skancke, head of the Las Vegas Global Economic Alliance, said his group too supports the plan. He said of the 251 companies that decided not to move to Las Vegas last year, 35 percent said it was because of the lack of workforce availability and education.

They were joined by Mike Kazmierski of the Economic Development Association of Western Nevada who said while that board hasn’t taken a formal stand on the bill, it has supported more funding for education in the past because education is critical to the ability to attract more businesses.

The lengthy hearing opened with Gov. Brian Sandoval himself saying the state is at a threshold and the future of economic development in the state depends on improving the education system — the keystone of his proposed 2016-2017 budget.

“The greatest reforms must be made in the ways we educate our children,” he said. “It will do no good to bring innovative industries to our state if we cannot provide the educated workers.”

Sandoval earlier presented a laundry list of new programs the business license fee would fund including programs aimed at preschool, reading proficiency, teacher effectiveness and reading proficiency.

The fee, outlined in SB252, is the main part of a plan to boost state revenue from $6.6 billion to $7.3 billion every two years. Sandoval said the $438 million the new tax would bring in is part of the more than $700 million in added education funding in his budget.

He said the new tax is broad-based because it would apply to all Nevada businesses and fair because it takes into account the differences between different types of businesses.

“We have a duty to take this challenge on now rather than leaving it for future legislatures, future governors and future generations of Nevadans,” he said.

He was backed by three former governors, Robert List, Richard Bryan and Bob Miller who all praised Sandoval’s courage for bringing the proposed tax and argued that it’s long overdue and needed to fix a revenue system designed in the 1960s that all three said no longer meets the state’s needs.

Others on the list of supporters include Elaine Wynn, current chairman of the state Board of Education and Phil Satre, longtime gaming and corporate executive who has managed companies including Harrah’s, NVEnergy and International Games Technology.

“The companies that are in this state are going to have to pay for improved education,” Satre said. “This is the best plan I’ve seen to make something happen and make education change.”

Homebuilders, construction industry officials and other business groups also joined in supporting the plan.

Among the opponents was the Nevada Policy Research Institute. Executive Vice President Victor Joecks said the tax was just a new version of the teachers’ gross receipts tax voters rejected in November and was equally flawed. He said it’s modeled after the Texas margins tax that resulted in 20 percent of small businesses laying off workers the year after it was implemented.

He added pumping more money into education makes no sense because the current system has a 50-year track record of failure.

Paul Enos of the Nevada Trucking Association pointed out giving interstate truckers a break because they haul goods out of state would be unfair to intrastate truckers. Intrastate truckers, who only transport goods inside the state, would have to pay the tax, Enos said.

He said those smaller companies would bear the brunt of the tax as opposed to the major national companies.

Carole Vilardo of the Nevada Taxpayers Association said her concern was the bill was not being looked at in conjunction with all the other bills that impact business.

She said there are a number of bills that will cost business money.

“We don’t look globally at what we’ve actually done to impact business,” she said.

Steve Hill, head of the Governor’s Office of Economic Development, said the high-tech companies now being drawn to Nevada need a well-trained sophisticated workforce.

Those students, he said, “have to have jobs that are appealing to them and challenge them.”

Hill said the biggest obstacle to economic development in Nevada is the state of the education system.

“If we could solve the education and workforce problems we have in Nevada now, we would take care of the majority of the issues we have in moving the economy forward,” Hill said.

Taxation Director Deonne Contine, Jeremy Aguero, of Applied Analysis, and Deputy Chief of Staff to Sandoval Chris Nielsen spent two hours laying out how the business fee would work.

It would put Nevada businesses, both those providing goods and those providing services, into about 30 different categories based on the North American Industry Classification System. Aguero said that system takes the type of industry into account in imposing taxes, is elegant in its design and “uniquely fitted to a state like Nevada.”

He said it includes not just the small number of businesses that currently pay the Modified Business Tax but all 330,000 businesses in the state.

Contine said that includes all persons and businesses who engage in trade for profit.

The only exemptions would be fore federally certified non-profit corporations with reductions for health care providers and hospitals.

Senate Majority Leader Michael Roberson, R-Las Vegas, said the hearing would continue today before the Senate committee with both supporters and opponents given ample time to make their case before any action is taken.

The bill must pass with two-thirds of lawmakers’ votes.