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KEVIN CLIFFORD / SPECIAL TO THE SUN
Majority Leader Steven Horsford, D-Las Vegas, shown during a Senate floor session April 8, says, “We need to broaden the tax base, whether it’s a net profit tax or something else where all businesses participate reasonably.” He says the tax would not go into effect until 2011, when, it is hoped, the economy will be stronger.
By J. Patrick Coolican (contact) 
, David McGrath Schwartz
Tuesday, May 5, 2009 | 2 a.m.
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Sun Archives
- A job you don't want: Projecting the state's revenue now (5-2-2009)
- State falls $550 million short in funding governor's budget (5-1-2009)
- In Henderson, Gibbons reiterates his anti-tax stance (5-1-2009)
- To be clear, Gibbons is against tax increases (5-1-2009)
- Gibbons to propose more salary cuts, says he'll veto tax hikes (4-30-2009)
- Lawmakers eye county dough (4-30-2009)
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Senate Majority Leader Steven Horsford, D-Las Vegas, said he is still committed to broadening Nevada’s tax base this session, including a corporate income tax that would be passed this year but wouldn’t take effect until after the 2011 session.
The need for fundamental tax reform was widely discussed by business and government leaders in the months leading up to the legislative session. But the idea has received scant support from legislative leaders in recent weeks, with Democratic Assembly Speaker Barbara Buckley and Republican Senate Minority Leader Bill Raggio opposing the idea. Horsford now hopes to revive it.
He said other legislative leaders are focusing on the current shortfall. Though he didn’t name them, he meant the Republican colleagues he has courted assiduously to give the expected $800 million or so tax increase a bipartisan stamp.
But he also could have been obliquely referring to Buckley. The Las Vegan, thought to be a candidate in the 2010 race for governor, has taken a more minimalist approach to changes in Nevada’s tax system, preferring to increase existing taxes rather than consider new ones.
Although Horsford agreed the short-term shortfall needs to be addressed, he said the state should use the current crisis to change the tax structure.
“Those who will be here two years from now, we’re thinking ahead,” said Horsford, who is serving his first term as leader after guiding Senate Democrats to the majority with two big victories last fall. “The stimulus is one shot. There’s likely to be a gap in revenue. We must address the fundamentals of our tax structure.”
He said increasing the existing modified business tax, which is a payroll tax, would not broaden the tax base.
Instead, he wants the Legislature to increase existing taxes to meet short-term needs and to put in place the new tax, though the state wouldn’t collect revenue on it for now.
Then the Legislature would form a technical committee to meet during the interim to recommend rates for the tax and how to implement it. If the tax were passed this year with a two-thirds majority, the Legislature could start it in 2011 if were approved by a simple majority rather than having to meet the two-thirds requirement again.
“We need to broaden the tax base, whether it’s a net profit tax or something else where all businesses participate reasonably,” Horsford said.
Horsford has rallied his caucus around the idea of passing a broad-based tax now, but it’s not clear whether he has support elsewhere in the building, or even how hard he is pushing it with the dozen or so legislators of both houses and both parties who are working on a final deal.
Assemblywoman Sheila Leslie, D-Reno, one of the dozen in that so-called “core group,” said she would support a corporate income tax — particularly if it went into effect in 2011 — when the economy has rebounded.
“When the economy is good, a broad-based tax gets large, out-of-state corporations who make millions to contribute to our tax base,” said Leslie, a top lieutenant of Buckley’s but also known as one of the Legislature’s most liberal members.
Horsford’s comments came at the end of a tumultuous day of closed-door meetings at the Legislature as lawmakers continue to confront the worst fiscal crisis in the state’s history.
Last week the state’s official fiscal forecaster, as well as the budget director, said legislators would have to find $900 million just to fund Gov. Jim Gibbons’ budget, which was viewed as draconian and unworkable by legislators in both parties. Although the deficit will be offset somewhat by federal stimulus dollars, the budget hole will still require a painful mixture of spending cuts and tax increases.
Asked where they are on a tax package, Leslie said, “We haven’t settled yet.”
Asked if the tax hike would be greater than $836 million, which was the amount raised during the difficult 2003 session, she said, “Republicans don’t want to go that high raising taxes, so we’re looking at other ways to raise revenues.”
Many observers believe Buckley is being pragmatic in courting Republican votes, but also wants to avoid being tagged for voting for what would be the largest tax increase in Nevada history.
Leslie said the differences between Senate and Assembly Democrats are “very small.”
Legislators began the work of cutting last night. State workers and higher education employees will take a 4.6 percent pay cut by being forced to take one furlough day a month, and teachers will be asked to take a 4 percent decrease.
A joint Assembly and Senate committee meeting Monday night approved the measure unanimously after leadership from both parties spent hours hammering out a deal.
Gibbons had recommended a 6 percent cut for state workers, teachers and higher education employees to make up for the state’s budget shortfall, in addition to a 36 percent cut to higher education spending.
Last week he said he would recommend a higher pay cut to meet a growing budget gap.
Legislative staff said they could not cut more than 4 percent from higher education and teachers because of federal stimulus dollars that come with the condition that the state maintain certain funding for education.
“This is one of the hardest decisions to make when closing the budget,” Buckley said. “It’s fair to say, no legislature wants to cut any of those funds. Unfortunately, revenue is 44 percent below what we need to fund current levels of funding.”
Legislators said the idea to furlough state workers one day a month came from the state workers union. State Budget Director Andrew Clinger said one furlough day a month would equal a 4.6 percent cut.
Raggio, the long-serving Reno Republican, said, “This motion comes as a result of extensive discussions ... This is not an easy decision.”
Of solace to state workers is this: If the economy improves, the Legislature will restore salaries.
The Legislature sets pay raises or reductions for state employees.
And, although legislators ultimately control the purse strings of school districts, they can only make recommendations about what school boards or the regents do with the money allocated.
If school districts don’t reach an agreement with local unions to follow the Legislature’s lead on pay cuts, the budget reductions will have to come from programs or some other area, which could devolve into a deeply divisive process.
“This stings,” said Lynn Warne, president of the Nevada State Education Association. But, she added, “these are very difficult times. I believe they’ve done all they can do.”
The joint money committee also decided to suspend merit pay increases and longevity pay for state employees.
This is a key week for the Legislature as it closes many of the remaining large budget issues. The core group of legislators has been meeting frequently to arrive at a consensus on what to cut and what taxes to increase.
Buckley said after today’s meeting that no agreement had been reached on anything other than salaries.
Horsford released a solemn statement: “This is a very tough time and a tough job. But it is what we were sent here to do.”
Coolican reported from Las Vegas.
Horsford is correct here but such "morning after" talk is unfortunately too little too late and represents mere political manuevering for the future on his part.
This legislature has had several months now to come up with a broad based business tax, but has, as usual, chosen the easy, cowardly and politically expedient way out, Horsford included. The evidence of this legislature's cowardice is in and Horsford was part of it.
Well tell me now if you are going to put in an income tax. We are just starting a new corporation and will pick another state to incorporate in and run the business. Thats why we moved FROM California, as its not only the tax amount, but also the bookkeeping requirements, audits, and other hassles of state taxation.
Just cut your damn salaries and useless pork and live within what the taxpayers can afford. Period. Or get out of office. I am tired of hearing all this whining. Everyone has to cut back, why are government programs exempt from the facts of reality?
National franchise corporations such as Burger King, Big O Tires, Wal-Mart and Bank of America all pay an earnings tax to all the states they operate in - why not a little for Nevada? Certainly they would not shut their operations here as a result.
Vegasd8 is correct. We need to increase taxes to corporations, not try to balance the budget on the back of teachers and state workers. Cutting a teachers pay by 4% is unfairly taxing this group to make up for the shortcomings of an entire state. Cutting state workers pay by forcing them to take a day off per month without pay is not right, but at least they get something (time off) for the pay cut. Do not punish a few in the state to make up for our financial shortcomings. It's time for everyone to give a fair share in these tough economic times.
term25600: Everyone has to cut back? Apparently, you are not willing to, given the whining you just did about any expenses or hassles to you. Government programs are not being exempted. So stay out of Nevada; we don't need you. There are plenty of additional tax options that could be pursued in this state, particularly to the mining industry.
Tax the Quarry's at the same rate as the casinos. These companies are from California and Mexico and could care less about anyone in Nevada. They get a sweetheart deal from the Gov't, pay a little money in fees to the state and destroy the environment. Here's a paragraph from a local paper here, which is also owned by one of the companies that is bidding on the new mine off Sloan.
"Meanwhile, the California Regional Water Quality Control Board is still working on a violation at the mine for not having adequate stormwater prevention plans. Another violation was fixed after a second notice was issued, said Stephen Cain, a spokesman for the agency.
After the county of Ventura failed to adequately enforce laws governing mines, the state stepped in last week and issued a violation against Tom Staben and his Camarillo quarry, Pacific Rock.
The state Department of Conservation had issued the county a 15-day notice in September requiring it to serve Staben with a cease-and-desist order for mining outside his permitted boundaries. It took the county six months to issue the order, but the results did not satisfy the state, which oversees local governments' enforcement at mines.
A separate violation against Staben and his Somis property is being handled by the U.S. Environmental Protection Agency. It claims Staben dumped dirt into Calleguas Creek after the 2005 floods to reclaim his property -- a violation of the Clean Water Act. A neighbor who was named in the violation for a similar action agreed in January to pay a $75,000 fine. The case against Staben is ongoing."
I second most posters sentiments on this--our state is already last in so many programs and services--education, health care, etc.
Certainly there's wasteful spending in all sectors, but it's high time that business ponies up their fair share--in particular the mining industry who are making money hand over fist from our state's natural resources.
Horsford and Buckley have lost my vote. We don't need new taxes. We need better use of taxpayer money. HOld the line, govenor Gibbons.
Mr. Horsford, the OECD along with the Federal Reserve and a host of other public and private organizations worldwide consider the corporate income tax to be the most volatile source of revenue for the government.
Clearly, if the goal was to weaken the pain of budget shortfalls you don't go after a corporate income tax.
Unrelated but a good article on Obama's moderate speed rail project:
http://cato.org/pub_display.php?pub_id=1...
It seems to me that Horsford is the only one who has the courage to suggest a long-term approach to our perennial financial problems.
Is it me, or did Buckley go on TV last summer and say "this will never happen again, not under my watch" in response to the band aid approach to funding the government shortfall? Yet here she is, along with the other leaders except for Horsford, saying all we need to do is tinker with what we already have. Well clearly what we already have is not and has not been working for us. Yes, we have the dubious honor of being almost last in many important markers including education, transportation, health services and the like.
Our government should be as small and efficient as it can be while providing world-class services. This is Nevada. No one likes taxes, but we all have to contribute. Our current tax structure taxes companies based on how many people they employ. That's a bit backwards as we should encourage employment.
Taxing the net profits as Horsford suggests is an equitable solution because it ensure all of us in business help contribute to our community. Unfortunately, those of us with Nevada based businesses contribute but many national and multi-national corporations don't. We all have a stake here. We all need to step up be willing to be part of the solution.
It is said that Buckley is running for Governor. Gibbons, for all his promise, has been terribly disappointing. I'm afraid Buckley would be no better. Different, maybe, but no better. Horsford, the only one who seems to be looking at our long-term future, should consider running.
We need real leaders right now. Not people we always agree with. Not people who are willing to take the easy road. But people who are willing to make the difficult choices.
Raising taxes does not take courage. It takes courage to reign in spending, create innovative solutions to solve state problems, and make adult decisions - like setting spending priorities.
Raising taxes is the easy way out.
Taxation is the mandation of theft, theft is criminal. A society which imposes criminal theft upon its citizenship deserves failure.
Taxation is an imperialistic directive which demands rather than requests citizens to forefeit what they've earned to those that don't.
Taxation is a moral wrong that propagates evil and must be abolished in order for social good to prevail.
"Mankind is more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed." T. Jefferson The Declaration of Independence, 4 July 1776.
"We cannot solve today's problems with the same level of thinking that created them." --A. Einstein
"Truth never damages a cause that is just." -Mohandas K. Gandhi.
"The best government is that which governs least"
@Patrick_R_Gibbons:
Agree. Raising taxes can be an easy way out. But it doesn't seem to be the case here. Or now.
We have an abysmal education system (apologies to all the people who work hard everyday trying to make it better), dangerous and inefficient transportation, overcrowded and underfunded prison system, overwhelmed public safety and first responders, failing public health and private health centers, and the current legislature is cutting 40% from current levels.
If failing is acceptable, which it shouldn't be to anyone who calls themselves American, then what is failing less 40%?
As a business person, I appreciate your ideology. Too often, politicians look at taxes as the easy way to solve their big government problems. That's not the case here.
Nevada is historically a lean state. Which is why we rate so poorly in the basic areas and functions of government that have universal support.
I agree with you that spending priorities are important. In fact, I think government should ONLY spend on our priorities. The problem isn't that government is funding projects that are not part of our priority-set to the detriment of our priority-set. It's that there's not enough money to to fund our priority-set to levels that can be considered successful.
We Republicans are always saying we'd like government to run more like a business. Well, in business when we need to invest in a new machine to stay competitive or a new truck or new employees or whatever, we find a way to make that investment. Because without it, we continue to fall behind on the path to failure. We take out loans, bridge lines, personally finance, etc. to improve our businesses. Yet, when government is in a similar situation, we say "tighten your belt."
Yes, in some situations (like the current economic downturn), it is important to tighten our belts, lay off people, freeze hiring, freeze raises, put off large purchases, etc.
But when we plan for the future (which every successful business does), we plan for additional spending in the areas of need BEFORE the revenue comes in to fund it. Why? Because those are the steps we have to take to be competitive and bring in those revenues!
So, taxes are not the preferred course. Especially when government proves inefficient. But when our state does not have what it needs to be successful, then we all have to ask what we can do to be part of the solution.
Saying "do more of the same" is not showing any willingness to be part of the solution.
Public spending was essential to creating jobs in the Great Depression. Look at these hundreds of billions now pouring in to everything. This economy will be turning around within months IMO -- found a cool site; Balkingpoints ; incredible satellite view of earth
Opti,
Lets say you run a business. You've got no competition, so you're a monopoly in your town. Your offer health insurance, life insurance, fire protection, police protection, courts, and you educate the local children.
People pay you because you told them to pay you and people who haven't paid you end up in one of your jails...yeah you run the jails too.
Each year you find you need more and more money to operate because well, what incentive is there for anyone in your company to do more with less?
If you need more money you just have to break some more knees.
The state government is the same way. Nevada's public education system isn't poor because there isn't enough money - we spend $13,000 per pupil in this state: http://npri.org/docLib/20090429_Funding_...
Its poor because we have a system that does not reward good teachers or punish bad schools. Its poor because we have top down management that treats everyone the same and leaves no room for innovation. Fiscal choices are made at a central office rather than by the principal. How to teach is determined by the legislature rather than the classroom teacher.
Its not the money, the problem is the system.
Opti there are other things we can do to address problems this state faces that don't involve government spending.
For example, state law prohibits individuals and small businesses from buying insurance policies written in other states. We could take advantage of California policies which have the benefit of having a significantly larger pool to spread risk (thus lowering premiums).
Want a better education? Why does a public education have to be in a public school? Why can't the government offer scholarships to kids to go to private schools? Poor kids living in a poor neighborhood are guaranteed a poor school. Give the kid a scholarship to attend any school they want. Private schools are often cheaper than public schools -- in fact they run from $2,000 in tuition to about $18,000. Why not advocate more charter or empowerment schools (public schools with more freedom) -- charter schools operate at a significantly lower cost than traditional public schools.
Want people to afford new fuel efficient cars? Instead of giving a tax credit, eliminate the state law that requires new cars to be sold at licensed dealers. We could allow factory direct or even the purchase of cars at Target or Wal-Mart or any other business.
There are lots of things the government can do, most of it is righting the wrong they've wrecked upon our economy with well-intentioned (but poor performing) laws.
@ Patrick_R_Gibbons:
"we spend $13,000 per pupil in this state: http://npri.org/docLib/20090429_Funding_... I appreciate that you write for NPRI, but NPRI is not a credible source. Correction, NPRI is not a neutral source. NPRI is an advocacy organization. It doesn't ask credible question and set out to answer it. Rather, it posits a position and seeks the information and data to support that position. There is nothing wrong with that. It just doesn't provide the most credible source material because we all know there is an agenda there.
"Its poor because we have a system that does not reward good teachers or punish bad schools. Its poor because we have top down management that treats everyone the same and leaves no room for innovation." I agree. There are many problems with the current system and you are addressing some here.
"Why can't the government offer scholarships to kids to go to private schools? Poor kids living in a poor neighborhood are guaranteed a poor school." I love this idea. It's not new, but I wish more people would give it consideration. One of the problems with it, though, is that while poor kids would then have an opportunity to go to a good school, how would they get there? Middle class kids' parents can drive them, but many poor kids don't have that luxury. I'm not sure what the solution is, but it's out there and shouldn't prevent this idea from being pursued.
"There are lots of things the government can do, most of it is righting the wrong they've wrecked upon our economy with well-intentioned (but poor performing) laws." Again, agree with you.
I think we have a lot in common. What it appears we lack is that I have faith that we can get it right.
Patrick Gibbons. As predictable and as influential as the governor.
If you raise taxes on let's say WalMart, do you think they will pay the tax from their current profits or pass it along to their customers? A corprate tax will always be passed onto the rest of us.
jldour--as pointed out by previous posters, Walmart does not charge lower prices in NV in comparison to states where they do pay income tax. So I guess the answer to your question is that the tax would be spread among all consumers everywhere Walmart does business. Or another way of looking at it--in NV, when we shop at Walmart, we must be paying a share of the taxes Walmart pays to other states.
Opti,
"NPRI is not a neutral source. NPRI is an advocacy organization. It doesn't ask credible question and set out to answer it. Rather, it posits a position and seeks the information and data to support that position."
This is a lofty claim which requires more than rhetoric to prove. In fact, it is equally likely that NPRI reaches its conclusions the way it does because the facts do demonstrate exactly what they posit.
Its a logically fallacy, I'm sure you can agree, to dismiss the research in such a way. That would the equivalent of me saying that the Teachers Union wants a tax increase just because they want to suckle from the state coffers. That would dismiss potentially legitimate concerns they have about the state of education without addressing any of their points.
Additionally,
If we can't listen to "advocacy groups" or groups that you do not deem neutral, would it be fair to ignore the numbers coming from Democrats and Republicans, from union groups, parental organizations, and from the higher education faculty?
To all others, can any of you prove that Wal-Mart doesn't charge lower prices? Can you prove why?
I've already posited several things from 1) some items are priced according to retail agreements 2) prices are reflective of the local market and some conditions are similar in different locations. This is influenced by personal taste (demand) wage levels, the availability of the good (supply), the cost associated with transportation (we're a landlocked state in the middle of nowhere remember) 4) prices are not profits...revenue is not profit. Profit is the money left over after all costs are taken into account. Wal-Mart could actually charge the same price in Nevada as in Oklahoma but because labor costs and transportation costs are higher profit is lower and 4) assuming Wal-Mart's prices do result in extra profits then more companies will come in to get their share of the profit, adding competition, creating new jobs, and in the end forcing prices down.
Anyone care to address this?
Harley may have a point though it is not apparent. If you eliminate all forms of tax which will eliminate most revenue for government operations at both federal and state levels I would bet that at this time next year the state budget of Nevada would not be the most pressing topic of discussion.