Las Vegas Sun

July 30, 2014

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STATE BUDGET:

Loophole a threat to Gov. Brian Sandoval’s tax pledge

Governor caught unaware of provision in 2009 agreement that cut taxes for small businesses

MAJORITY AFFECTED

Legislation that raised taxes on big businesses, which Gov. Brian Sandoval hopes to let expire in 2011, also lowered the tax rate for 73 percent of the state’s smallest businesses, which were taxed at 0.5 percent for the first $250,000 in payroll instead of the previous rate of 0.63 percent.

THE COST: $15 MILLION

Unless Sandoval acts, the increased taxes could cost small businesses $15 million over two years. Although it’s a small amount relative to the state’s estimated $2.2 billion deficit, Sandoval has appeared intent on making a principled stand on the issue.
Brian Sandoval

Brian Sandoval

Heidi Gansert

Heidi Gansert

About 70 percent of the state’s businesses would see their payroll taxes increase if Gov. Brian Sandoval keeps his campaign promise to allow a 2009 tax package to expire.

The reason: To sell that legislation two years ago, Democrats included a mix of tax increases for bigger businesses, aimed at bringing in an additional $347 million, with tax cuts for a majority of smaller businesses struggling through a deep recession.

When asked about the issue by the Sun, the Sandoval administration was unaware that a small-business tax increase would accompany expiration of the 2009 legislation.

Chief of Staff Heidi Gansert said the administration was “re-examining the budget” in light of the issue. Yet she remained vague about what the budget will contain.

“We’re doing our best to make sure the budget makes sense,” said Gansert, who was the Republican Assembly minority leader before joining the Sandoval administration.

The budget is not complete, but in its final stages, undergoing proofreading by the budget office before being printed Monday.

Sandoval will unveil his recommended spending plan Jan. 24, when he delivers his State of the State address. He has said only that it will contain “shared sacrifice” in the form of cuts and no tax or fee increases.

He has also promised to undo the tax changes passed in 2009 over a veto from Gov. Jim Gibbons.

Sandoval has vowed that the state will spend no more than $5.3 billion over the next two years, the amount of revenue projected by the state’s official forecasters, the Economic Forum. That estimate assumes the 2009 Legislature’s $1 billion tax increase would expire as lawmakers intended.

The Democratic-controlled Legislature, joined by a majority of Republican state senators, passed the tax increase and overrode Gibbons’ veto. To make the tax increase more palatable to conservatives, Democratic Assembly Speaker Barbara Buckley put a wrinkle in the increased payroll tax: It lowered the tax rate for 73 percent of the state’s smallest businesses. The first $62,500 of payroll a quarter, or $250,000 a year, is taxed at 0.5 percent instead of the previous rate of 0.63 percent. Any payroll over that amount has since July 1, 2009, been taxed at 1.17 percent.

Without passage of legislation to extend changes in the tax rates, the increases and the reductions will return to their previous levels.

Some estimates put the value of the increased taxes on small businesses at $15 million over two years. Although it’s a small amount relative to the state’s estimated $2.2 billion deficit, Sandoval has appeared more interested in making a principled stand than taking a pragmatic approach.

Sandoval won a decisive victory over Gibbons and his Democratic opponent by promising not to raise taxes or fees, saying families and businesses couldn’t afford to pay more in this economy.

Gansert said the office was still gathering numbers on the effect of continuing the lower payroll tax rate for small businesses.

Assemblywoman Debbie Smith, D-Sparks, and incoming chairwoman of the Assembly Ways and Means Committee, first raised the issue to the Sun.

“I guess I am surprised” that the governor’s office didn’t recognize the issue sooner, Smith said. “There are great minds working on this budget.” Smith didn’t repeat criticism Sandoval has received from other Democrats and many large businesses over his inflexibility on raising taxes.

“I’m trying very hard at this point to reserve any of that until I see the budget and those discussions begin,” she said. “I’d prefer if he had an open-minded approach. But we aren’t in the place yet where we are having those discussions.”

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  1. An interesting challenge for the Governor.

    The answer is to not fall into this trap. Instead the state has to move forward on revenue/tax reform and take a good hard look at some of the structural changes that have been brought forward by both sides over past couple of years (some will pay more, others less, however revenues can be set at 2007 levels).

    What better time to get started than this morning?

  2. Adventures in Sandogibbonsland....

    Sandogibbons: "HEIDI!"

    Gansert: "Yes, B.S.?"

    Sandogibbons: "First, you got me into a constutitional mess by allowing me to accidentally set new testing requirements through a proclamation on reading an hour after I took the oath. NOW you FORGET the details of the most controversial tax package in the states history THAT YOU DEBATED WHEN YOU WERE IN THE LEGISLATURE?!"

    Gansert: "Sorry, B.S."

    Sandogibbons: "Heidi, I hired you to be my Chief of Staff because you served in the legislature and you could tell me what to do without getting me into trouble. So far, in the first couple of weeks, you aren't doing very well."

    Gansert: "Sorry, B.S. I'll do better."

    Sandogibbons: "That's what I want to hear. Now, give me an update on the printing of the state budget. Will it be completed on time?"

    Gansert: "Afraid not, B.S."

    Sandogibbons: "Why?"

    Gansert: "The employees who proof the budget and the employees who print the budget are not here. We furloughed them."

    Sandogibbons: "Well, then break out your magnifying glass and pull some reams from the supply room yourself, Heidi. Well, no reason for me to stay here if the staff is furloughed. Call my personal Nevada Highway Patrol Troopers that serve as my expanded protective detail 24 hours a day so I can leave."

    Gansert: "Sorry, B.S. They're on furlough, too. They're state employees."

    Sandogibbons: "Well, then, Heidi, guess you'll have to do. Go get the knife Mike McGinness used in Raggio's back and protect me as I walk to the mansion."

    Gansert: "You got it, B.S.!"

  3. Ol' Smoke & Mirrors Sandoval...

    He will not "raise taxes";
    He WILL, however, make many decisions from his throne
    that will cause cities or counties to raise taxes...

    The whole "no tax" mantra is a JOKE!

    Let's start at the federal level.
    They say "no more money for X, sorry."
    That puts the onus on the state.
    The "state", with a "no tax" pledge, says "Sorry, we have to cut X."
    That puts the onus on the county.
    The county says, "Sorry, X is out of the question this year, the state took our money."
    That puts the onus on the city, which says,
    "If you want X, we must increase taxes."

    There ARE essential services.
    They need to be funded.
    Playing "Pass the Tax Buck" only transfers the increase from one entity to another.
    Just because it didn't come from your front-right pocket doesn't mean you won't pay... it could come from one of the other 3.
    It's a SHELL GAME.
    The "winner" says, "I did NOT raise taxes!"
    The "loser" says, I was pick-pocketed!"

    Politicians, STOP PLAYING "PASS THE TAX BUCK"!!!

    Nevada has one of the lowest per-capita tax burdens in the U.S.A., & "ON PRINCIPLE", (and because they allowed it to be written into the constitution!) refuses to ask Gaming & MINING to pay their fair share...
    They somehow think if NO ONE PAYS, services will magically continue, or, we can do without them.

    Having low/no taxes does one thing: It assures you will live in a crap-hole that has low/no taxes.

  4. GOVO.2 Jerry Brown already has a budget, this guy has no backbone. He is a poor manager. He has created problems in the whole state when it comes to taxes, cities, counties, school districts. All suit and no substance.