Nevada’s tax advocates may have an unusual ally in Perry

By David McGrath Schwartz

Sunday, Sept. 4, 2011 | 2 a.m.

Texas Gov. Rick Perry could become an unlikely friend to Nevadans seeking to raise taxes here.

On the stump, Perry brags about the “Texas Miracle” — a record of job creation in the Lone Star State as the national employment picture darkened. It’s a message that resonates — especially in Nevada, with our nation-leading unemployment.

A poll released Friday showed Perry leading Republican presidential candidates in Nevada, besting former Massachusetts Gov. Mitt Romney 29 percent to 24 percent.

But another part of Perry’s record could create an interesting dynamic here:

A favorite tax of Nevada liberals and pro-revenue business executives — a “margin tax” — is patterned after one passed by Texas lawmakers with the conservative Republican’s support.

Opponents of such a tax in Nevada — conservative Republicans most likely to support Perry — could be forced into pretzellike contortions: supporting Perry, while railing that a tax like he helped adopt in Texas would kill jobs in Nevada.

The Texas tax passed in 2006 and was implemented in 2008.

Perry’s deputy press secretary, Lucy Nashed, said keeping taxes low is a priority of the governor. The margin tax was a response to a Texas Supreme Court ruling requiring a change in school funding. “The tax rate charged to small businesses is one of the lowest rates in the nation,” she said in an email. “Most small businesses are exempted.”

Nevada’s Democratic leadership, Senate Majority Leader Steven Horsford of North Las Vegas and Assembly Speaker John Oceguera of Las Vegas, were aware of the Texas tax when they met before the 2011 session with business leaders to evaluate ways to raise revenue for the state. Out of the discussions emerged a proposal, a key part of which was a modified version of the Texas margin tax.

Horsford and Oceguera released their proposal less than a month before the session ended.

The plan — 0.8 percent tax on gross receipts over $1 million, with deductions for payroll or other expenses — was the subject of long hearings. Republicans opposed it. The business community was lukewarm.

Ultimately, the Legislature and Gov. Brian Sandoval kept taxes at current levels. The state’s only broad-based business tax is on payroll, which Democrats have decried as a deterrent to hiring.

But the itch to change Nevada’s tax system remains. Many groups, left and center, complained about an impotent or unwilling Legislature. Those groups — labor unions, gaming, mining and other businesses — have yet to form a coalition to advocate for a tax increase. But some promise a fight.

“We’ve decided we need to do something,” said Danny Thompson, head of the state AFL-CIO. “The Legislature is either unable or unwilling to solve this problem.”

Thompson wouldn’t commit to a particular tax or a method of enacting it. Sources close to the negotiations said the tax they settle on will be vetted with polls and focus groups.

Whatever emerges — even if it looks like something Perry has supported — will have immediate critics.

Monte Miller, a prominent fundraiser for Sandoval and former Gov. Jim Gibbons, in an interview called the Texas tax a “mistake Gov. Perry made.”

“He’ll have to answer for it if he runs for president,” said Miller, owner of the KeyState Corporate Management, a business holding company. “For Nevada, it would be a disaster. For Texas, it’s a small rate. But in 25 years, it will be a devastating rate.”

Nevada’s payroll tax is fair because it is tied to the footprint of employees, said Miller, whose business employs 12 people in Nevada and two in Delaware. “It’s their fair share.”

Of Perry, Miller said, “If he can say ‘I made a mistake,’ I could be behind him.”

Perry supporters should expect an argument with anti-tax Nevadans like Miller — no small subset of our GOP — if the Texas governor campaigns here. For Democrats and those who want to see the tax system changed, that’s good news.

As the saying goes, the enemy of my enemy is my friend.