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April 24, 2017

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New taxes pass Assembly; no-tax Republicans can’t undermine Sandoval

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Cathleen Allison / AP

In this April 21, 2015, file photo , Nevada Assembly Republicans, standing from left, Victoria Seaman, Jim Wheeler and Michele Fiore talk with Assembly Majority Leader Paul Anderson, center, on the Assembly floor at the Legislative Building in Carson City.

The Assembly Republican Caucus did not have the votes to kill an omnibus measure that extends and increases more than $1.5 billion worth of taxes, paving a clear path for GOP Gov. Brian Sandoval to sign into law the revenue increases he proposed to fund education reforms and increase the state’s budget.

A historic vote supported by Sandoval, moderate GOP legislators and Democrats, lawmakers passed the bill 30-10 after a 90 minute debate.

The 25 Assembly Republicans, plagued by infighting over conflicting tax ideologies, needed 15 no votes to prevent a two-thirds majority from passing a tax hike.

For months, a cohort of no-new-tax Republicans boasted of having enough votes to thwart a tax increase. But on Friday the group began to fray. By early Sunday it was clear the tax would pass.

Assembly Republicans who voted against the measure include: Michele Fiore, Victoria Seaman, Brent Jones, Ira Hansen, Jill Dickman, Chris Edwards, Shelly Shelton, Robin Titus, Jim Wheeler and John Ellison.

All 17 Democrats voted for the measure. Two likely Republican no votes were absent: John Moore and Victoria Dooling. On Sunday, Moore was taken to the hospital and Dooling suffered the death of her husband.

The bill, a combination of SB 483 and AB 464, will go to the Senate for concurrence. Without any holdups, it will then head to Sandoval’s desk and end any speculation about a special session on taxes. By combining the measures, Assembly lawmakers will have no other chance to vote on the pivotal tax hikes before the session ends midnight Tuesday.

The measure included the extension of the “sunset” taxes in SB 483, which raises more than $600 million by increasing payroll and sales taxes. The sunset taxes first came into effect during the heart of the Great Recession in 2009. Republican Gov. Jim Gibbons vetoed the measure but the Legislature overrode it. Sandoval promised to let them expire in his first gubernatorial campaign but he twice extended them. The economic conditions and the state’s budget grew dependent on them. Now, with education reform a top priority, the sunset measure is paramount for funding Sandoval’s plan.

The provisions in AB 464 — known as the Nevada Revenue Plan — will raise at least $510 million every two years. It also adds a new business filing fee and creates a gross receipts tax. Businesses earning less than $4 million will be exempt from paying the gross receipts portion. For companies making more than $200,000 per year, the rates on the payroll tax will be increased from 1.17 percent up to 1.475 percent with mining and financial institutions paying 2 percent. Businesses will be able to credit 50 percent of their gross receipts tax against the payroll tax.

It also raises the tax on cigarettes from 80 cents to $1.80.

Sandoval proposed a similar measure earlier in the session but it never passed the Assembly. The new taxes aim to broaden the state’s tax base by collecting revenues from out-of-state businesses that sell goods in the state.

In total, the money will fund a $7.4 billion general fund and boost state K-12 funding by nearly 16 percent to $2.85 billion. The general fund balance will be a more than $1 billion increase compared with the current biennium. That money will also add around $400 million to the Distributive School Account, a coffer for public school funding separate from the general fund.

"This vote moves us one step closer to cementing the legacy of improving public education by both raising accountability as well as increasing investment in order to suit the needs of generations to come,” Sandoval said in a statement. “The passage of this bill is a testament to the vision, dedication and determination of the members of the Nevada State Assembly, and represents their commitment to doing what is best for our citizens. Their display of bipartisanship reminds us how effective we can be when we work together."

The gross receipts section — which is estimated to raise $120 million every two years and charge a rate based on 27 different business classifications — has been compared to the margin tax ballot initiative that voters rejected in the November election.

Assemblyman Ira Hansen, R-Sparks, called the taxes “disgraceful” and said "voters were very wise and they probably have more wisdom than any of us do."

Marilyn Kirkpatrick, the outgoing Democratic leader in the Assembly and one of the loudest supporters of Sandoval’s plan, said she opposed the margin tax in November because “it wasn’t the right policy.”

She dismissed comparisons between Sandoval’s plan and the failed ballot initiative.

The margin tax was a flat 2 percent rate on businesses earning more than $1 million and would have raised at least $800 million.

Sandoval’s plan has multiple and lower rates, more exemptions and raises less money per year.

“I think that the myths that are out there are incorrect,” Kirkpatrick said.

The vote exemplified the Sandoval administration’s ability to win votes from Republicans who campaigned to not raise taxes. The crux of their argument: raise money to improve Nevada’s public education system — one of the worst in the nation. The floor debate was a rare moment when Democrats praised their Republican peers and GOP governor on a controversial vote. It was also an opportunity for GOP members to explain why they support tax hikes.

Assemblyman Erv Nelson, R-Las Vegas, was one of the first votes to swing from nay to yea.

He changed after conversations with Sandoval’s staff and lobbyists, saying the state’s education system is what’s deterring new businesses from coming here.

“I have offended a number of my very best friends...before I came here I was a right wing extremist. Now I am a RINO (Republican in Name Only).”

Assemblyman Derek Armstrong — another swing vote who ultimately supported the measure — said raising taxes wasn’t a silver bullet.

He said he campaigned against "raising for taxes for business as usual in Carson City."

“This isn’t that,” he said.

Assemblywoman Michele Fiore said that a handful of her Republican colleagues were breaking campaign promises to not raise new taxes, saying their “integrity and character were on the line.”

Krikpatrick responded to Fiore’s comments, saying it’s not a mark on the integrity of people who vote in favor of the plan.

She addressed the state’s bottom-tier education system and the 10 years she’s spent trying to raise taxes to bolster the public education system.

“It is easy to vote no,” Kirkpatrick said. “It is easy to fill the budget and expand it. But it is hard to [vote] and go home. But if you explain it to your constituents they will understand.”

The sky isn’t falling, said Assembly Majority Floor Leader Paul Anderson, R-Las Vegas.

Anderson owns an IT company. His tax burden will rise with the proposal but increasing education funding is more important, he said.

“Rather than being shamed or critical of the way we educate our kids we will be able to hold our heads high,” he said.

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