Assembly passes compromise tax plan

The Assembly Sunday passed a compromise tax plan even Minority Leader Lynn Hettrick, R-Gardnerville, said contained some improvements.

Hettrick and 15 other Republicans still voted against the bill. But under the Supreme court decision issued Thursday, the Democrats didn't need two-thirds. A simple majority of 26 was enough.

The bill, SB6, heads back to the Senate Monday where the question remains whether a majority of the Senate will support or reject it. If a majority of Senators reject the amended bill, differences between the houses must be worked out in a conference committee.

"We have made significant improvements to this bill," said Assembly Majority Leader Barbara Buckley, D-Las Vegas. "In my opinion, it is a fair and balanced way to fully fund the state's budget."

The conflict has centered on the demand by Assembly Democrats that any tax bill contain either a gross receipts or net profits tax on business. But Senate Republicans rejected that and sent the Assembly a bill based on a payroll tax.

In the wake of the Supreme Court ruling, the Assembly Democrats had the votes to push their plan through the lower house. Instead, they presented a compromise that includes a smaller version of both a payroll and a gross receipts tax. The plan would generate $788.8 million over the next two years.

Another bill, SB2, would increase fees charged by the Secretary of State's office and raise $46 million more for a total tax package of $830.6 million to balance the budget and fund education.

To make up the rest of the $860 million shortfall, SB6 eliminates the $30 million deposit to the Rainy Day Fund.

Buckley said Nevada's business taxes would still be well below the national average and below what all the states around Nevada charge.

Hettrick said he agrees the amendments "do improve the bill in some sense." But he said they "make it worse in others." He predicted the taxes will make some businesses leave Nevada and prevent others from coming here.

"If we have businesses that move here just because they can have very low taxes then maybe we don't want those businesses," said Assemblyman Harry Mortenson, D-Las Vegas, in response.

David Goldwater, D-Las Vegas, said businesses are choosing to locate in areas such as Silicon Valley where taxes are much higher than those in SB6.

"When businesses are surveyed as to why they locate in a place, taxes are on that list," he said. "But they are no where near the top of that list."

He said the top of the list is good schools and universities, quality of life and cultural amenities.

"Anyone can sell on price," he said. "Selling Nevada on quality is what we are trying to do here. This is the business climate we want to create in Nevada."

The floor session finished up with more political gamesmanship as Hettrick first tried to ask a bill draft for a continuing resolution to fund education saying lawmakers might not get the job done by Aug. 1.

Buckley objected making it clear she thinks the GOP holdouts would use a continuing resolution to argue education is funded, allowing them to further delay any tax plan.

"I see a continuing resolution as a step backwards," she said.

Then, after the majority vote passing the plan, Hettrick called on Perkins to declare the bill failed because it didn't receive a two-thirds vote and have the Assembly vote on that issue.

"The court didn't declare it unconstitutional. I swore to follow the constitution, not the supreme court," he said afterward.

That would have forced supporters to vote against the two-thirds requirement so the GOP could use it against them in their next campaign.

After a procedural discussion, Perkins headed him off by adjourning the floor session for the night. Hettrick said the GOP is looking at whether they can take the majority issue to court and declare the bill illegal.

The tax bill reduces the Senate version of cigarette and liquor taxes a bit. It keeps the half-percent increase in gaming taxes worth $92 million, the Real Estate Transfer Tax raising some $104 million, and a slightly different version of the entertainment tax which Buckley said was designed to focus more on tourists and less on events residents might attend. The entertainment tax will generate about $118 million over the biennium.

It cuts the proposed payroll tax from 1 percent to .05 percent -- which would raise about $161 million instead of $328 million in the Senate plan. It imposes a franchise fee of about 0.1 percent on businesses in a complex system of tiers based on gross receipts to make up the loss. Businesses grossing less than $500,000 and nonprofits would be exempted.

It raises the Senate franchise tax on banks from 3 to 4 percent -- raising about $17.6 million beginning in 2004.

The Senate is scheduled to convene about noon.