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September 30, 2014

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MEMO FROM CARSON CITY:

How Sandoval’s decision on taxes remakes politics for the next year

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Paul Takahashi

Gov. Brian Sandoval’s budget director told the heads of state agencies to plan for a budget without further cuts to spending.

Gov. Brian Sandoval’s decision last week to support extending $620 million in taxes set to expire next year will define state politics over the next 15 months and likely his re-election campaign in 2014. Here’s why:

    • Broken promises

      During his campaign for governor in 2010, Sandoval vowed that under no circumstance would he raise taxes. And extending the so-called sunset taxes, first passed in 2009 and set to expire in two years, amounted to a tax increase, he said.

      He broke that promise in 2011 but had cover in the form of a Nevada Supreme Court decision that cast doubt on the state’s taking of some local tax dollars, which were part of Sandoval’s budget.

      When he announced his decision last week, he pointed to costly federal mandates in the federal health care legislation. But if he believed that raising taxes was “the worst thing you can do” coming out of a recession, couldn’t he find a way to make it work?

      Some conservatives might think so.

      This could be the soft belly of Sandoval’s re-election campaign should he draw a credible opponent.

    • A ‘broken’ process

      Near the end of the 2011 Legislature, tax proponents — including Democrats, labor and the education lobby — concluded it would be nearly impossible to get the two-thirds support to raise taxes and avoid round after round of budget cuts. The process, they said, was broken. All they could foresee was a bloody-knuckle battle every two years at the Legislature just to maintain current funding levels. The only path to more money for the state, they reasoned, was the ballot.

      Sandoval’s softening on the sunset taxes — because it will spare further budget cuts — is an attempt to head off calls for more taxes at the ballot box. The governor said as much. But will others agree?

    • Labor’s response

      He didn’t have to wait long for an answer: Labor groups said Sandoval’s proposal is insufficient.

      The Nevada State Education Association said current funding levels still leave services in the tank. The Nevada chapter of the American Federation of State, County and Municipal Employees doubted that state workers would finally see an end to furloughs and pay cuts.

      Headed by the AFL-CIO, labor has been working on a business margins tax initiative and building a coalition to support it.

      Mining, gaming and the broader business community have remained silent about the initiative. But their response, including whether they see Sandoval’s plan as sufficient, could be key to the initiative’s success or failure.

    • Governing or negotiating

      Some conservatives believe that even if the governor wanted to extend the sunset taxes, he shouldn’t have said so in advance.

      Their thinking is he could have staked out an anti-tax position and used that to wring concessions from Democrats during the 2013 session. Democrats are, after all, virtually guaranteed to have a significant majority in the Assembly and possibly control the state Senate.

      Instead, Sandoval’s budget director told the heads of state agencies last week to plan for a budget without further cuts to spending.

    • Taxes threaten Anti-tax Island

      The Governor’s Mansion has for five years and three months been Anti-tax Island — the defining force in the Nevada Republican Party. That shifts with Sandoval’s support of the sunset taxes.

      His decision shocked some people, including conservative activist Chuck Muth, Nevada’s keeper of the no-tax pledge, and the free-market think tank Nevada Policy Research Institute. But that was about it.

      State Sen. Michael Roberson, R-Las Vegas, had earned conservative kudos for jousting with Democrats. But soon after Sandoval’s announcement, Roberson sent out a statement: He, too, supports extending the taxes.

    • Democrats need a new message

      Since 2009, Democrats, who supported tax increases to spare the worst budget cuts, had a consistent mantra: “We’re the reasonable ones.”

      In budget hearings, they made cuts, looked for efficiencies, reduced state workers pay, but then they would talk about raising taxes.

      Republicans, for the most part, just said no.

      But now Sandoval has taken the Democrats’ ground.

      It’s their move.

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    1. As usual the red Las Vegas Sun interprets the governor's flexibility as "broken promises." Rational conservatives realize that the path than by Gov. Gibbons was not sustainable. We also know with the economy improving, things will get better. Sandoval is taking the measured course and should be applauded for "reaching across the aisle." The Sun would NEVER do that because it interferes with its left wing agenda.

    2. Mr. Griffith, Mr. Sandoval never would have made it out of the primary had the voters known of his purported "flexibility."