Coalition taking initiative to change state’s tax structure

By David McGrath Schwartz

Thursday, Dec. 29, 2011 | 2 a.m.

CARSON CITY — The seemingly constant fight over Nevada taxes will be waged in a new way — with an initiative petition to implement a business tax that would raise at least $400 million over two years.

A group, led by the state’s largest labor union, is finalizing legal language before circulating the proposed initiative, according to sources close to the process.

The initiative, which would change state law, will be based on the “margins tax” proposed by Democrats during the 2011 Legislature, according to a source. That tax proposal was modeled after Texas’ “franchise tax,” which was levied on business gross receipts.

Proponents will have to collect 72,000 signatures — 18,000 in each of the state’s four congressional districts. If successful, the proposal would go to the Legislature for consideration in 2013. If the lawmakers don’t pass it within 40 days, it will go to the ballot in 2014 for voters to decide.

Advocates for changing the state’s tax structure and increasing the funding for social services and education hope to build a coalition of support among business leaders, gaming, mining, teachers and labor.

But that hasn’t happened yet.

The AFL-CIO, the state’s largest labor union, is leading the way. One source predicted the coalition would eventually be broad. “It will be just about everybody. Whether they’ll put their name on committee or not, I’m not sure,” the source said.

However, the state’s power brokers, including gaming, mining, the teachers union and AFL-CIO, have been talking about changing the state’s tax structure since the 2011 session ended in June. The challenge: to close the state’s budget deficit of more than $1 billion.

At the end of that session, the Legislature re-extended taxes passed in 2009, but did nothing to change the tax structure, which critics say is too dependent on gaming and sales tax.

That led to widespread frustration in the Nevada establishment and a consensus that no tax, even one that was revenue neutral, could pass the Legislature, where it takes a two-thirds majority to raise a tax or fee. (A ballot question only requires a simple majority of voters for it to pass.)

Billy Vassiliadis, lead lobbyist for the Nevada Resort Association and CEO at R&R Partners, a leading Nevada lobbying firm, predicted that labor would be able to collect enough signatures.

Danny Thompson, secretary-treasurer of the AFL-CIO, “has a pretty successful history of qualifying stuff for the ballot,” Vassiliadis said. “So yeah, I would be somewhat confident he’d get that done.”

He said the gaming industry has no position on any proposed initiative.

“There is no quote-unquote industry position. I know several of our folks are frustrated with what’s been an inconsistent base of revenue and the challenges faced every session,” he said. “If you look at the last 10 years, gaming has come to the table a couple times. Some are predisposed (to a broad-based tax). Others will take a more measured approach in supporting tax increases,” Vassiliadis said.

Thompson said he would not comment until the language is finalized.

Initiative proponents can’t file the necessary paperwork with the secretary state’s office to start collecting signatures for the measure until after Jan. 1.

In 2009, when the state faced a massive budget deficit, Democrats waited until the final days of the Legislature to release their tax plans. That was based off the experience in 2003, when former Gov. Kenny Guinn went into the session with a tax plan that was then picked apart.

Although the Legislature raised taxes that year, it did not pass the tax that Guinn advocated. In 2011, Senate Majority Leader Steven Horsford, D-North Las Vegas, and Assembly Speaker John Oceguera, D-Las Vegas, waited until early May, with 30 days left in the session, to propose their $1.2 billion tax package.