Let’s get excited for another tax fight in Nevada!
Tax revenue for the past few months is good, at least compared with the noxious numbers the state has seen in recent years. But the budget figures presented last week to the Economic Forum — the state’s official fiscal forecasters — are only a few million dollars above projections. That’s a drop in the bucket compared with what the state would need to fund services and avoid another ideological throwdown in Carson City.
The state is set to lose about $1 billion — half from its general fund and half from education funding to school districts — in the next budget cycle because some taxes are scheduled to expire. That’s roughly a sixth of general fund spending over two years.
In each of the past two sessions, Republicans have used votes to extend these taxes as leverage with Democrats, getting in exchange changes to public employee pensions, health benefits and collective bargaining. (To pass a tax increase in Nevada requires a two-thirds majority.)
The taxes at issue — passed in 2009 and extended in 2011 — raised the state’s payroll tax on larger businesses and increased vehicle registration fees and sales tax.
They will expire July 1, 2013, unless lawmakers vote to extend them.
Lawmakers won’t return to Carson City until 2013, but the tax debate will begin in the next few months. Gov. Brian Sandoval’s administration will in February direct agencies to build their budgets, and Democrats and Republicans will fight in the coming campaign season for control of the Legislature.
In an interview last week, Sandoval said it was “premature” to say whether he would build his budget assuming those taxes will be extended. He said he would continue to monitor tax collections.
This position is different from that of his campaign in 2009 and 2010, when he promised not to raise taxes under any circumstance, and vowed to allow the temporary taxes to expire.
Sandoval maintained that position until close to the end of the session, when the Nevada Supreme Court ruled the state’s taking of $62 million from a local government fund was unconstitutional. Sandoval decided that ruling could also negate other budget gimmicks he had used to balance spending and revenue, and he persuaded a majority of Republicans to extend the temporary taxes to plug those holes.
As a condition of their support, Republicans insisted that the taxes be extended for just another two years, practically guaranteeing the same debate would be repeated in two years.
Some Republicans dissented. More say they will again next year, when the Legislature convenes.
Sen. Michael Roberson, R-Las Vegas, who is in position to lead the Senate Republicans, said he believed the taxes should expire.
“I’m opposed to extending the sunsets,” he said. “We need to figure out a way to do that while preserving funding for K-12, higher education, health and human services, all important public services that the government provides.”
He said he was confident such a balancing act is possible.
“It’s the lazy legislator who says, ‘We can’t balance the budget and we need to raise taxes,’” he said.
Sen. Sheila Leslie, D-Reno, said the state needs to reform its tax system to make it more stable and remove the need for constant fights over revenue. Leslie said she hoped the governor would take the lead on tax reform, beyond merely advocating for extending the taxes.
But Sandoval won office on promises to sunset those taxes and roll back spending.
If anything, political observers outside the administration expect a replay of 2011. Sandoval will tell agencies to prepare budgets assuming those taxes to go away and then use those taxes as leverage to wring concessions out of Democrats in the Legislature.