Tax, budget deal falls apart

Launce Rake and Cy Ryan

Monday, July 7, 2003 | 11:13 a.m.

A vote on Nevada's tax and budget future, and the continued operation of the state's public schools, is off, ranking lawmakers said Sunday night.

Lawmakers hoped that a marathon seven-hour bargaining session Saturday might have produced a result that would have made intervention by the Nevada Supreme Court unnecessary. But Assembly Speaker Richard Perkins, D-Henderson, said Sunday night that it did not appear that there were enough votes to support the plan.

Plans to bring the Assembly into session today were off.

"We're telling them to stay home," Perkins said of his party's caucus.

Legislators from both sides of the impasse declined to discuss on the record details of the latest compromise produced Saturday, but insiders said the proposal took the controversial gross receipts tax, or franchise fee, on business off the table.

Instead, the compromise included a 2.5 percent flat tax on net profits for all businesses. It also called for a payroll tax of 0.8 percent on the first $21,500 of wages per employee.

The compromise plan cut the hotel-motel room tax, but retained an increase on liquor, cigarettes and real estate property transfers.

The proposal included a total of about $803 million in new taxes over the next two years.

Assembly Minority Leader Lynn Hettrick, R-Gardnerville, said Sunday the bloc of 15 GOP assemblymen -- which has blocked the tax plan -- has increased, though he did not say how many now were opposed or who they were.

The bloc has been able to head off approval of any tax plan because it needs two-thirds approval. The Democrats and four Republicans have been able to muster 27 of the 42 members, one shy of the required two-thirds vote.

Hettrick said it would be a "waste of taxpayer money" for members to return today for a vote that would likely fail.

Senate Majority Leader Bill Raggio, R-Reno, canceled a call for lawmakers to meet at noon today. He said he was informed by Hettrick that Assembly Republicans would not go for the suggested compromise plan.

"Nothing is going to happen today," said Raggio, who added he hoped to meet with Hettrick late this afternoon.

The compromise plan called for the tax to raise $803 million during the next two years, down from the $873 million in the Senate tax bill that was rejected in the Assembly.

Republican holdouts in the Assembly have consistently stuck to their goal of no more than $704 million in new taxes as well as removal of the gross receipts tax in any fashion.

"It does sound like this latest package does not meet our compromise position," said Assemblyman Bob Beers, R-Las Vegas.

Beers said the Assembly should meet to vote on the budget for public schools, one constitutional requirement that triggered Gov. Kenny Guinn's petition to the Supreme Court for intervention. Beers admitted that the move would not resolve the other constitutional requirement, that the state have a balanced budget.

"It does not address the unbalanced budget but at least we wouldn't be holding our kids hostage," Beers said.

The coalition in support of the new taxes, now pegged at about $860 million over two years for the existing budget for state services plus school needs, have criticized the holdouts' effort to bring the school budget up for a vote. Without the new revenue, they say, the government's check for needs cannot be cashed.

"My goal is to actually having something happen this time," said Assembly Majority Floor Leader Barbara Buckley, D-Las Vegas.

Buckley and Perkins said their effort was undercut by Hettrick, who said early Sunday that few of the holdouts had budged in their resistance.

"I know they say I'm trashing it," he said. "But all I did was call my members and lay out the numbers. Most of them, before I could finish laying out the plan, said 'no.'

"A few of them asked me how I would vote. I told them the same thing I have said all along 'I will not vote for an income tax on business.' "

"I didn't have to trash anything. This is about an income tax that is bad for the state of Nevada."

Ranking Republican Assemblyman John Marvel, R-Battle Mountain, said $803 million is too high. The net profits tax would create a "mini IRS" in Nevada, Marvel said. The state Taxation Department would become a bigger bureaucracy, he said.

Marvel said there were other taxes that would generate the same amount of money without adding layers of government.

Marvel had been tabbed as one of those who might switch to vote for the proposal.

Perkins said the 2.5 percent net profits tax would be the lowest in the nation. At present Kansas is the lowest at 4 percent, he said.

Perkins said his Democratic caucus is "not terribly happy but they realize this is a compromise." He said he doesn't like the net profits tax and instead prefers the gross receipt tax.

"Nobody is going to get a perfect bill. We had to find a compromise," Perkins said.

Hettrick said the bill approved by the Senate earlier calling for a 1 percent payroll tax and a 3 percent net profits tax on financial institutions was a "good mix." He said he could support that if the amount of $873 million was lower.

Perkins said Sunday that Raggio and Republican Sens. Mark Amodei, R-Carson City and Mike McGinness, R-Fallon, supported the $803 million compromise -- "which is a pretty good cross-section" of the GOP party, he said.

Senate Minority Leader Dina Titus, D-Las Vegas, said her group of nine Democrats is prepared to return to Carson City.

"They seem fairly satisfied with the compromise," she said, adding that everybody doesn't like everything in the new plan.

Assemblywoman Valerie Weber, R-Las Vegas, said she can't support a net income tax.

"It doesn't fly well with the people and the people in my district," Weber said. She said the Democrats were willing last week to negotiate the tax plan down to $783 million, not its back up to $803 million.

"I'm trying to figure out how this is a compromise," Weber said.

Assemblyman Tom Grady, R-Yerington, said the compromise package "is not something I could support."

Assemblyman Pete Goicoechea, R-Eureka, said the $803 million is still too high and he would not back that plan.

Some Republicans say they would go for a $703 million tax increase, but that is the highest figure they would accept, they said.

"I don't know where we would go" if the Assembly Republicans continue to block the tax increase, Raggio said Sunday.

Assembly Majority Whip Bernie Anderson, D-Sparks, said a compromise appeared unlikely to fly. He said the legislators, however, tried to remain optimistic that something can happen before the court orders some kind of intervention.

"We're hopeful that we can head this off before the Supreme Court can make its determination," he said.

But with the collapse of the deal, which was negotiated by the Assembly leaders on both sides but largely orchestrated by Raggio, the Supreme Court's deadline to receive written briefs from all sides by 5 p.m. today.

Raggio said lawmakers may ask the court for an extension of the filing deadline as negotiations proceed.

The court has several options, among them a simple order to the Legislature to go back to work and get the constitutionally mandated work done. However, legislators on both sides of the issue said Sunday that they have reached the point where little else in the way of compromise is likely.

If the Legislature is not able to resolve the impasse, Guinn and Attorney General Brian Sandoval, both Republicans, have indicated they could ask the court for more radical intervention.

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