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May 28, 2015

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Democrats unveil plan to hike payroll tax to fund education

Updated Monday, May 13, 2013 | 1:26 p.m.

State Sen. Mo Denis

State Sen. Mo Denis

Brian Sandoval

Brian Sandoval

Nevada Senate Democrats announced a $255 million tax plan this morning that raises the payroll tax on some businesses.

The temporary tax hike would increase the mining industry’s payroll tax more than other businesses.

Under the plan, the current payroll tax rate of 1.17 percent would increase to 1.5 percent, and mining’s rate would increase to 2 percent. Businesses with less than $250,000 in payroll costs would be exempt, which remains unchanged from current law.

The tax hike would expire in 2015, at which time another unidentified tax would take its place.

The tax plan follows on the heels of a proposal last week from Assembly Speaker Marilyn Kirkpatrick, D-North Las Vegas, who proposed an 8 percent tax on admissions fees on movie tickets, gym memberships, clubs and live entertainment.

Democrats in the Senate have said repeatedly that they believe the state needs to pay more into its education system this year. They said this morning that their plan would pay for English Language Learner programs, pre-kindergarten and full day kindergarten programs, and proposals that require third graders to read at grade level before advancing to the next grade.

“Throughout the session, there has been bipartisan agreement that we need to do more for education, and this is the only proposal that immediately solves our funding shortfall,” said Senate Majority Leader Mo Denis, D-Las Vegas. “If we want to truly address our education crisis, there is no justification in not supporting our proposal.”

Noting that Nevada is repeatedly ranked at the bottom of national education rankings, Sen. Debbie Smith, D-Reno, said that “our education crisis is directly tied to our slow job growth.”

“Nevada is a great state to do business but, unfortunately, companies fear they won’t have a qualified workforce if they relocate here or expand their existing businesses in Nevada,” she said. “In order to be an economic leader, we need to properly fund education.”

Republican Gov. Brian Sandoval also supports paying more into these programs and has done so in his $6.6 billion state general fund budget for the next two years, just not to the extent that satisfies many Democratic legislators.

While it is unclear whether Sandoval supports this Democratic plan, he has said repeatedly that he will not support raising taxes. This year, he has also proposed offering further exemptions from the state’s payroll tax.

The Sandoval administration has not responded to questions The Sun asked about the Democratic plan. Denis said the governor "is aware" of the plan Democrats unveiled today.

This year, Sandoval has also proposed offering further exemptions from the state’s payroll tax by exempting businesses with less than $340,000 in annual payroll costs, an increase from the current $250,000 threshold.

Sandoval also has recently apportioned about $25 million toward full-day kindergarten and English Language Learner programs with money that was added to the state budget after he released his original plan early this year.

Sandoval also intends to spend about $37 million on health programs and eliminate state worker furloughs by July 2015.

That’s in addition to another $37 million that a group of state financial advisers projected for the budget when they adjusted 2012 revenue estimates this month.

Democrats said in their press release that they intend to shift that all of that money “to fund Democratic education legislation.”

Denis acknowledged that Democrats and the governor are essentially playing tug-o-war with the same pot of money.

“We’re putting out what we think the priorities are,” Denis said. “We need to sit down with the governor, the Assembly and the Republicans and come to a conclusion.”

Denis refused to provide details on the long-term tax plan under consideration.

He said he’s in conversations with business groups to finalize the details on a broad-based business tax that would replace the payroll tax hike in 2015.

Part of the long-term solution would be to eliminate the payroll tax entirely, replacing it with something like a corporate income tax or another proposal.

“We aren’t prepared to finalize that yet,” Denis said. “We’re trying to get support for various different things but we hope to have that soon.

Democrats settled on the payroll tax-- formally called the Modified Business Tax, because it would be relatively easy to administer and would bring in new revenues for education programs by this upcoming school year, Denis said.

“While some people don’t like the MBT, most businesses agree that it’s a simple tax because it takes one form to fill out,” Denis said.

Noting the high wages the industry pays its workers, the mining industry bristled at being singled out for an exceptionally large tax increase above and beyond the increase for other businesses.

“Our industry should be encouraged to keep supplying some of the state's best jobs at these salary levels instead of being singled out for additional taxation,” said Tim Crowley, president of the Nevada Mining Association. “We encourage them to enact broad-based taxes and avoid further narrowing Nevada's tax system."

While education has been a banner issue for both parties this year, the Democratic press release also indicated that Democrats “began the (legislative) session introducing the only legislation aimed at solving Nevada’s education crisis.

Senate Republicans, however, also have introduced education proposals this year and have introduced a mining tax that would begin to fund education programs in 2015 if passed by voters.

Senate Minority Leader Michael Roberson took to the Senate floor Monday to castigate Democrats for dropping a major tax increase proposal at the end of the session and accuse them of catering to the mining industry. Roberson wants to increase mining taxes by $600 million. The Democrats' proposal amounts to about a $22 million increase, he said.

"I cannot support this type of short-sighted, counterproductive proposal that penalizes struggling businesses while once again allowing big mining to dictate its own tax policy," Roberson said..

Anjeanette Damon contributed to this story.

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