Sandoval: Tax talk premature

Gov. Brian Sandoval said he remains bullish about Nevada's economic future and dismisses banter of pending tax initiatives as premature and wrong for the state.

"I don't believe it's prudent to set tax policy based on initiatives," the first-term Republican told The Associated Press this week in an interview at his Capitol office.

At least one tax initiative is coming that backers said stems from years of frustration with legislators failing to adequately fund education and other vital state services.

A no-new-tax candidate, Sandoval bowed to fiscal pressures last year, agreeing to extend $620 million in temporary taxes to balance the current budget after a Nevada Supreme Court ruling late in the 2011 legislative session blew a potential $656 million hole in his conservative spending plan. Those taxes expire in June 2013.

The budget deal included education and other reforms sought by the governor, tax breaks for small businesses, and a plan to overhaul Nevada's economic development efforts. Sandoval said those policies need time to play out - and he remains opposed to new taxes.

"I've always had a consistent position, that I would not be supportive of new taxes," he said.

"I think it's important to look at how we're doing now. Right now, all the indications are positive. Certainly we all would want to do better."

Nevada has the highest rates of unemployment, bankruptcies and foreclosures. The state's jobless rate fell to 13 percent in November in the first drop since May, down from 14.9 percent a year ago.

"We're on the right path on that, but it's still unacceptably high," Sandoval said.

Democrats last year introduced a $1.2 billion plan to implement a business margin tax and extend the sales tax to some services. But the effort was abandoned when it became clear it lacked the two-thirds majorities needed in both the Senate and Assembly for passage or to override a promised veto by Sandoval.

But the stability of Nevada's tax structure, which relies heavily on sales and casino taxes that are subject to volatile economic swings, has been questioned in various studies over the years.

The most recent report released last fall by the Brookings Institution and SRI International said "the state's heavy reliance on consumption-related sectors ... has left the state prone to extreme economic volatility and lingering malaise."

"The recession in short exposed an economy dangerously out of balance."

Nevada AFL-CIO leader Danny Thompson, who's leading the most visible tax initiative effort, said lawmakers have historically failed to heed economic storm clouds.

"If you want to diversify the economy, you have to improve your education system," he said. "If the measurement is low taxes and a good business environment ... we should be overrun with new businesses here and we're not."

Thompson warned before the start of the 2011 legislative session he would take the tax battle to voters if lawmakers failed to act. Backers are fine-tuning language and expect to file it with the secretary of state's office soon, he said.

"We have underfunded the education system in this state to the point there's nowhere else to go," Thompson said. "State government has been running on life support."

Lynn Warne, president of the Nevada State Education Association, said the teachers union is part of a coalition supporting the effort.

"Everyone recognizes we have an antiquated tax structure in this state," she said.

Backers would need to collect more than 70,000 signatures to send the proposal to the 2013 Legislature. It would then need approval by two-thirds of lawmakers or it would go to voters in 2014.

Another effort is led by Las Vegas attorney Kermitt Waters, who filed a lawsuit this week challenging the state's single-subject restriction on initiatives. He said he intends to circulate a constitutional amendment to raise mining taxes and abolish homeowners' property taxes.

Nevada's powerful casino and mining industries, frequent targets when state coffers sputter, have long advocated for a broader-based tax structure.

"We have relied too heavily on too few," said Tim Crowley, president of the Nevada Mining Association, whose organization will wait to see any proposal before deciding whether to support it.

Sandoval said his cabinet will begin evaluating a budget plan for the 2013 Legislature after the independent Economic Forum meets in June to project tax revenues based on existing revenue sources.

"I really think it would be imprudent for me to be making specific decisions with regards to what the budget is or what the tax policy is going to be without specific numbers," he said.

"I do not want to give false expectations or unreasonable expectations on how we're going to build this budget."