Senate adds new wrinkle to tax plan debate

The Nevada Senate late Wednesday added a new wrinkle to its tax plan -- a cap on how much the budget can grow each biennium.

The amendment would limit how much the governor can increase the general fund to the percentage of the state's population growth plus inflation. The cap is designed to win the extra vote or two needed to reach a two-thirds majority and pass a tax plan in the Senate.

"This is considerable progress," said Majority Leader Bill Raggio, R-Reno, pointing to the 16-5 vote to draft the tax plan in Wednesday's committee of the whole.

But Raggio noted that a tax plan passed in the committee last week with 16 supporters, only to fall one short of two-thirds, 13-8, when it reached a final vote.

The cap does allow the governor to exceed that limit in cases involving a threat to life or property and to cover expenses such as new federal mandates that weren't anticipated.

Sen. Ray Rawson, R-Las Vegas, cautioned other senators that the cap could lock in Nevada's budget very close to the total funding levels it now provides.

"It seems to me we can take a number of our systems that were basically last in the country and say that, 10 years or 20 years from now, they will basically still be last in the country," he said.

And he said if population levels off and the nation suffers deflation, the governor would be forced to build a budget that is smaller than the previous two-year budget, even if real costs may be higher.

"It seems to me this is very restrictive," he said. "We may be over-limiting the capability of legislatures in the future."

But Sen. Joe Neal, D-North Las Vegas, pointed out that one Legislature can change anything its predecessor did.

"Future Legislatures cannot be bound," he said. "They can change it."

The basic tax plan centers on the proposal that was defeated last week by just one vote on the Senate floor. It includes an employer tax, real estate transfer tax and entertainment tax, and increases in cigarette and liquor taxes. The final version of it would also include a 3 percent franchise fee on banks.

Altogether, the plan would generate $866 million over the next two years, enough to fund the proposed budget.

The idea of a franchise tax on all businesses was dropped after staff raised concerns the estimates of what it would raise are too uncertain to rely on.

The franchise tax is one of the keystones of the legislation the Assembly is considering, and members have said they don't like the payroll or employer tax.

In addition, the Assembly bill -- also modeled on the plan narrowly defeated last week -- has no cap mechanism.

The Assembly spent nearly five hours on the floor Wednesday in what blossomed into the kind of debate members have previously conducted only through dueling press conferences.

Assemblyman Bob Beers, R-Las Vegas, described the tax plan as "the biggest private to public conversion since the Bolshevik revolution."

Beers, Minority Leader Lynn Hettrick, R-Gardnerville, and Ron Knecht, R-Carson City, repeated their demand the budget be reopened and cuts discussed before they vote on any tax package. They said the total tax package must be lowered to at least $704 million. Knecht said he can't justify more than $450 million new dollars.

They said they presented a tax plan 54 days into the session along with proposed budget cuts, but that the majority controlled the process and those issues weren't heard.

Speaker Richard Perkins, D-Henderson, said the GOP leaders never drafted a tax bill of their own nor presented those cuts to the Ways and Means Committee. He said, in fact, they voted for most of what is in the budget they now demand be cut.

"That makes it very difficult to go back and consider these legitimate cuts," he said.

Even so, he said several elements in the GOP proposal are included in the Assembly bill, including a real estate transfer tax.

Ways and Means Chairman Morse Arberry, D-Las Vegas, also said the Republican hardliners failed to present specific cuts and changes to the budget during the regular session.

"You waited until now, at the end of session, when we closed most of the budgets and the train has left," he said. "I'm sick and tired of this. You had an opportunity. It's time to bite the bullet."

William Horne, D-Las Vegas, said everyone knew tax hikes were necessary when they ran for office.

"We all espouse how important our teachers are and our children, but talk is cheap," he said. "We need to start showing by our action how important our teachers are, how important our children are."

Wednesday's discussion, however, prompted several members including Tom Grady, R-Yerington, and Joe Hardy, R-Las Vegas, to say they see some good ideas in the proposal and are willing to work toward compromise.

"We need to get together, work together, pass something and go home," said Grady.

The Assembly was scheduled to continue the debate today as the Senate attempts to pass its proposed tax plan.