Mo Denis to go to bat for payroll tax hike today

By Andrew Doughman

Tuesday, May 21, 2013 | 2 a.m.

Perhaps nobody at the Legislature this year has been more insistent than Nevada Senate Majority Leader Mo Denis that the state must immediately put more money into Nevada’s education system.

And Republican Gov. Brian Sandoval could hardly have been more clear when he said he opposes and would veto Denis’ bill to increase payroll taxes for education.

But Denis will make the case today that his payroll tax hike proposal is the best way to help Nevada’s schools next school year.

Noting that Nevada consistently ranks near the bottom of state-by-state education comparisons, the Las Vegas Democrat is proposing increasing the state’s payroll tax from 1.17 percent to 1.5 percent for big businesses and to 2 percent for the mining industry.

Businesses with less than $250,000 in annual payroll would be exempt, as they currently are.

His bill would bring in an estimated $255 million during the next two years and is up for a hearing at 1:30 p.m. today in the Senate Revenue Committee.

The money would pay for Democratic proposals implementing universal full-day kindergarten classes, more programming for English-language learners, and class-size reduction for children in kindergarten and grades one through three.

As opposed to a Senate Republican mining tax plan that would be on the ballot in 2014, Denis is selling his plan as the only legislative proposal that will immediately deliver a large cash infusion to the state’s education system during the upcoming school year, a move he says will improve test scores and help schoolchildren have a better education.

Republicans have called the proposal a nonstarter, noting that economic growth, revised revenue projections and other routine budget adjustments have resulted in the state’s two-year education budget growing by about a half billion dollars over current spending levels. (Democrats say that about $120 million of this money pays for new programs; the rest is the result of enrollment growth and other roll-up costs.)

Denis said he wants Republicans to consider his proposal because they’ve been saying all legislative session that the state’s education system deserves more money.

“We can make the case that we need to do more today, and if they don’t want to do that, if they want to come out publicly and say, ‘No, we don’t want to do more for education,’ they can do that,” he said. “But it’s the right thing to do. It’s right for our kids.”

Senate Minority Leader Michael Roberson, R-Henderson, told Denis the plan was dead on arrival. Democrats need three Senate Republicans to join them to pass the tax, so Roberson’s words carry weight.

“A massive expansion in the payroll tax will instead result in more Nevadans losing their jobs,” he said in a statement read on the Senate floor. “I will not support it.”

Denis said the payroll tax plan is simply the only way to put significantly more money into the education system during the next academic year.

Sitting in his office last week, he explained how the proposal came about.

In conversations with state tax experts, he quickly learned that the only way to accomplish his goal would be to work within the state’s current tax structure because a new tax would take years to implement.

“The thing that became quite apparent right away was that if we want to do something today, it has to be something we’re already doing,” Denis said. “So what we did was we started talking to all the stakeholders, from business to mining, teachers, chambers of commerce, all those kind of individuals, retailers; we brought them all in here.”

Senate Democrats discussed raising the sales tax, the insurance premium tax, property tax abatements and a tax on services.

They met with business lobbyists multiple times, and the various business groups told them that the payroll tax is easy to administer, simple to calculate and predictable over time, Denis said.

They’ve also been meeting with these same lobbyists to discuss a broad-based business tax, which would replace the payroll tax hike in two years. With less than two weeks left in the legislative session, that proposal remains unreleased.

But it may be a moot point. Republicans have largely, if not completely, coalesced with Sandoval, whose policy has basically been: “Better Schools, No New Taxes.”

“We have put a monumental marker down to show that education is a huge priority for this state,” Sandoval said during a news conference last week.

But Denis notes that Republicans are committed to vote with the governor to extend what was supposed to be a temporary increase in the payroll tax. Sandoval has long supported extending 2009 tax increases, which include raising the payroll tax from 0.63 percent to 1.17 percent for businesses with annual payrolls in excess of $250,000.

Expanding the payroll tax another 0.33 percentage point is a reasonable proposal if it means Nevada’s schoolchildren receive more money during the next school year, Denis said.

But the very business groups that Denis has consulted to develop the proposal now say they won’t support it.

While saying the payroll tax is so simple that business owners can “figure it out on a napkin,” Reno Chamber of Commerce lobbyist Tray Abney said Democrats need to first agree to pass chamber-supported proposals such as altering collective-bargaining, construction-defect and prevailing-wage laws. All of these proposals are Republican bills.

“It’s unconscionable to take money away from Nevada families and taxpayers to fund a status quo system,” he said.

The Retail Association of Nevada objects to the extension of current exemptions given to businesses with less than $250,000 of payroll. Assembly Speaker Marilyn Kirkpatrick, D-North Las Vegas, said that results in about 70 percent of businesses not paying the tax.

But Denis said he did not want to burden small businesses with the tax hike.

Instead, he’s moving forward with the hearing despite sure Republican and business opposition.

It may be Denis’ last stand. A representative for the governor said Sandoval still opposes and will still veto the bill.

That’s not stopping Denis.

“If we can’t, then we won’t get it done, but we’ll still move forward with something that we think needs to happen within the limits that we have,” he said.